An international comparison of pricing callable and puttable bonds in international financial markets

Abstract

Outlines recent research on short term interest rate models and applies Baron‐Adesi et al’s (1999) Box method to value default free bonds and contingent claims. Uses Episcopo’s (1999) historical interbank estimates of the Chan, Karolyi, Longstaff and Sanders (1992) model for Australia, Belgium, Germany, Japan, the Netherlands, New Zealand and Switzerland to calculate implied bond and contingent claim prices; and briefly discusses the results for each country. Finds both default free bonds and callable/puttable bond prices are sensitive to the interest rate model used.

Citation

Nowman, K.B. and Sorwar, G. (2001), "An international comparison of pricing callable and puttable bonds in international financial markets", Managerial Finance, Vol. 27 No. 1/2, pp. 99-110. https://doi.org/10.1108/03074350110767529