Nasdaq shines a light on Danish covered bond pricing
Nasdaq has developed a new method for pricing Danish covered bonds, which are typically more difficult to price than fixed-rate euro deals because of prepayment risks of mortgages in the underlying pool and negative convexity associated with callable deals.
Nasdaq has developed what it describes as a purely data-driven approach to bond pricing that results in a considerable improvement in pricing accuracy, particularly with regard to illiquid callable bonds.Normally bond prices rise as rates fall. But in the case of covered bonds, if rates tumble, homeowners ...
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