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Mbt Shoes Toronto,Smbt0736,costs of applying single factor exercise strategies

Mbt Shoes Toronto,Smbt0736,costs of applying single factor exercise strategies

This paper studies the costs of applying single-factor exercise strategies to American swap options when the term structure is actually driven by multiple factors. Mbt Shoes Mississauga Using a multifactor string market model of the term structure, we find that even when single-factor models are recalibrated to match the market at every exercise date, the exercise strategies Mbt Shoes Toronto they imply can be suboptimal. Based on estimates of notional amounts outstanding, the total present value costs of following single-factor strategies could be several billion dollars. These results illustrate the importance of using well-specified term structure models. This paper is to investigate advantages and disadvantages of common currency basket denominated bonds over single international currency denominated ones for bond issuers in East Asia in terms of both foreign exchange risks and liquidity. Our empirical analysis obtained the following results: (i) the currency basket denominated bonds would be able to decrease foreign borrowing costs and their risks in many cases; (ii) the US dollar has the highest degree of liquidity for bond issuers in all of the nine East Asian countries; (iii) bond issuers in East Asia face trade-off between foreign exchange risks and liquidity in choosing currency denomination of issued bonds.
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