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Pricing Fund Liquidity Provision, Marco Rossi

Abstract
This paper presents a market-based framework for pricing Fund liquidity assistance that accounts for the credit risk and the insurance benefit involved in such operations. It is based on the isomorphic correspondence between Fund liquidity and common stock put options. Although only illustrative, the simulations presented in this paper show that the value of the liquidity guarantee provided by the Fund could range from a few to over one hundred basis points depending on the borrower's creditworthiness, the volatility of capital flows to the borrowing country, and the amount of funds potentially needed to meet the borrower's external obligations
Table Of Contents
Contents; I. Introduction; II. A Pricing Framework for a Liquidity Facility; A. The Conceptual Framework; B. The Operational Framework; Pricing the put option; Assessing the probability of no access to markets; C. Some Simulations; III. Conclusion; References
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (13 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781462359875

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