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Rob's e2700 Notes

👨‍🏫 Notes

📖 Berk, DeMarzo and Harford Sections 15.1, 15.3, 15.4

i>c    ⇔    PB<F    ⇔    (discount bond)i=c    ⇔    PB=F    ⇔    (at par)i<c    ⇔    PB>F    ⇔    (premium bond)\begin{aligned} &i>c \;\;\Leftrightarrow\;\; P_B<F \;\;\Leftrightarrow\;\; \text{(discount bond)} \\ &i=c \;\;\Leftrightarrow\;\; P_B=F \;\;\Leftrightarrow\;\; \text{(at par)} \\ &i<c \;\;\Leftrightarrow\;\; P_B>F \;\;\Leftrightarrow\;\; \text{(premium bond)} \end{aligned}

International Bonds

  • Domestic Bonds
    • Issued by a local entity and traded in a local market, but purchased by foreigners
    • Denominated in the local currency
  • Foreign Bonds
    • Issued by a foreign company in a local market and are intended for local investors
    • Denominated in the local currency
    • Yankee bonds: Foreign bonds issued in the United States
  • Eurobonds
    • International bonds that are not denominated in the local currency of the country in which they are issued
  • Global Bonds
    • Combines the features of domestic, foreign, and Eurobonds, and are offered for sale in several different markets simultaneously
    • Can be offered for sale in the same currency as the country of issuance