Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/147654
Title: TIPS AND THE EMBEDDED DEFLATION PUT OPTION
Authors: LI ZHOU
Issue Date: 2012
Citation: LI ZHOU (2012). TIPS AND THE EMBEDDED DEFLATION PUT OPTION. ScholarBank@NUS Repository.
Abstract: Previous studies in US Treasury Inflation-Protected Securities (TIPS) tend to ignore the embedded deflation put option which guaranties that bondholders are not adversely affected by deflation. In essence, most researchers implicitly or explicitly assume that the option values are trivial and treat the principal payments of TIPS as fully adjusted for inflation. However, recent economic turmoil and uncertainty about future market conditions make this assumption questionable. Our estimation from empirical data suggests that the option values can be non-trivial and exhibit substantial time variation which closely matches market incidents such as Lehman‘s bankruptcy and the onset of European sovereign debt crisis. We also find the theoretical option values obtained by substituting historical volatility into the Jacoby and Shiller (2007) model are mostly smaller than the empirical option values.
URI: http://scholarbank.nus.edu.sg/handle/10635/147654
Appears in Collections:Bachelor's Theses (Restricted)

Show full item record
Files in This Item:
File Description SizeFormatAccess SettingsVersion 
b32079163.pdf1.3 MBAdobe PDF

RESTRICTED

NoneLog In

Page view(s)

3
checked on Sep 27, 2018

Download(s)

1
checked on Sep 27, 2018

Google ScholarTM

Check


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.