TY - JOUR
T1 - Pricing of optional bonds
AU - Galai, Dan
PY - 1983/9
Y1 - 1983/9
N2 - This paper presents a valuation formula for optional bonds. The value of an optional bond is expressed as a weighted average of an index-linked bond and a nominal bond, and the weights are a function of the relative value of the index-linked component to the nominal component, the time to maturity of the bond of the volatility of the inflation rate. By assuming the validity of the model and market efficiency, the valuation formula is used to impute the otherwise unobservable nominal yield to maturity for bonds in Israel.
AB - This paper presents a valuation formula for optional bonds. The value of an optional bond is expressed as a weighted average of an index-linked bond and a nominal bond, and the weights are a function of the relative value of the index-linked component to the nominal component, the time to maturity of the bond of the volatility of the inflation rate. By assuming the validity of the model and market efficiency, the valuation formula is used to impute the otherwise unobservable nominal yield to maturity for bonds in Israel.
UR - http://www.scopus.com/inward/record.url?scp=48749149712&partnerID=8YFLogxK
U2 - 10.1016/0378-4266(83)90042-0
DO - 10.1016/0378-4266(83)90042-0
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AN - SCOPUS:48749149712
SN - 0378-4266
VL - 7
SP - 323
EP - 337
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 3
ER -