View Full Version : Real yield curves in emerging markets
02-21-2005, 01:45 AM
I am looking for info/advice on constructing a real yield curve for pricing inflation linked swaps in South Africa (where there are only four points from which to plot the curve!).
Any advice will be appreciated...
02-21-2005, 01:08 PM
How about finding a yield curve from another country, perhaps from a different point in time, that closely matches your data points, and assuming the rest of the curve is similar.
02-21-2005, 01:45 PM
If you are pricing that way, can I please be your counter-party?
02-21-2005, 11:10 PM
The thing is, you need to be able to hedge your inflation exposure once you have bought or sold an instrument off the curve. In the US with many Treasury Inflation Protected Securities (TIPS) you just go buy/sell the bond and add your spread. In SA, say you sold a TIPS maturing in 2028, there is nothing to hedge with. The closest two points are 2023 and 2033. And what excacerbates this is that inflation in emerging makrets can be quite eratic. SA inflation has been in the 20's in the last two decades, back down to 4% now. Our neighbour, Zimbabawe, has had inflation in excess of over 100% in the last 12 months...Pretty obvious why a close hedge is crucial if your gonna sell TIPS.
02-22-2005, 11:18 AM
Have you checked in with the folks on the forums at www.wilmott.com and www.nuclearphynance.com? Those guys eat this type of stuff for breakfast.
02-23-2005, 02:18 AM
Have you checked in with the folks on the forums at www.wilmott.com (http://www.wilmott.com/) and www.nuclearphynance.com (http://www.nuclearphynance.com/)? Those guys eat this type of stuff for breakfast.You need:
to get to the phorum.
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