Banco Central de Reserva del Perú Banco Central de Reserva del Perú Investigación Económica y Financiera
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Structured bonds valuation

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December 2015

Language: Spanish

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Structured bonds valuation

Keywords

  • derivatives valuation
  • P-Splines
  • Quasi Monte Carlo
  • structured bonds
  • term structure of interest rates
  • yield curve estimation

Abstract

A method to price structured bonds is proposed. It includes two key elements: (1) construction of zero coupon curves to discount cash flows and (2) simulation of cash flows for the underlying option. For (1) the study uses the penalized B-Spline method and for (2) it uses a Quasi-Monte Carlo based on a generalized Halton sequence.