Asset Pricing

Foreign Currency Bonds

Foreign Currency Bond

Bonds that is issued by any entities (government, a public/special corporation and etc.) in foreign currencies (US dollars(USD), Euros(EUR), Japanese yen(Yen), etc. )

  • Korean Paper
  • Foreign Company Issued
  • Foreign CP
  • Bonds with Option
01. Collect Market information, 02. Reflect SPREAD, 03. Calculation
inform of Collect Market information, Reflect SPREAD, Calculation
01Collect Market information

Collect Market information to create Zero Curve

  • For each currency, Estimate the yield for representative bonds on each credit rating sector and maturities on government bonds
  • Create Zero Curve by using Cubic Spline Method
  • Collect Market information (quotations, traded price, etc.) through brokers and market participant.
02Reflect SPREAD

Reflect Market spread on individual bonds

  • Analyze market information
  • Reflect spread (Local Time 16:00)
  • Check for any impacting NEWS on the individual bonds

Calculate foreign currency bond price

  • Calculate the discount rate by applying the spread to the zero curve
  • Calculate the price by discounting each cash flow by discount rate
  • Calculate variables to bond price, yield, duration, and Convexity

Foreign currency bond classification

inform of Kimchee Bonds, Arirang Bonds, Samurai Bonds, Shogun Bonds, Dimsum Bonds, Yankee Bonds, Bulldog Bonds
Kimchee Bonds Bonds issued in South Korea, in non-KRW denomination
Arirang Bonds Bonds issued by foreign entity in Korea, in KRW denomination
Samurai Bonds Bonds issued by foreign entity in Japan, in Yen denomination
Shogun Bonds Bonds issued in Japan, in non-Yen denomination
Dimsum Bonds Bonds issued in Hong Kong, in a RMB denomination
Yankee Bonds Bonds issued by foreign entity in United States, in UDS denomination
Bulldog Bonds Bonds issued by foreign entity in United Kingdom, in GBP denomination