1. Key Concerns and Solutions
Bloomberg
1/17/2019
Valuation of Bonds
Key Concerns and Solutions
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Nitin Jaiswal
Bloomberg L.P
©2003 Bloomberg L.P. All rights reserved.

2. Agenda for the Presentation
Bloomberg
1/17/2019
Agenda for the Presentation
Importance of Valuation for a Bond Market
Key Issues relating to Bond Valuations in Asia
Government Bonds
Corporate Bonds
Making a robust Valuation model for Asian Bond Markets – ideas and suggestions.
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3. Importance of Valuation for a Bond Market
Bloomberg
1/17/2019
Importance of Valuation for a Bond Market
Transparency
IAS 39 Guideline
Basil II Guideline
Stringent disclosure requirement post Enron and WorldComm Scandal
Risk Management
Key concern for any bank
Avoiding financial scandals
Brings Liquidity in the Market
Transparent market will attract investment
Example: Bond Funds, investment in Financial Industry
A good valuation model is the necessity of every financial markets.
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4. Valuation of Government Bonds
Bloomberg
1/17/2019
Valuation of Government Bonds
Key Requirements:
To have a well accepted model to calculate fair values for the illiquid bonds.
To have a well accepted par coupon and zero coupon curve.
To have a well accepted underlying risk free government curve.
Easy availability of the information.
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5. Valuation of Corporate Bonds
Bloomberg
1/17/2019
Valuation of Corporate Bonds
Key Issues:
Nature of Corporate Bonds
Large number of issues
Complicated structures
Illiquidity premium
No clear cut guideline on corp. bond valuations
Information Disclosure
Bond Structure
Ratings information
Yield calculators
Price availability for all the bonds
Issues related to private placement
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6. Nature of Corporate Bonds
Bloomberg
1/17/2019
Nature of Corporate Bonds
Large number of corp. bonds : (ex Japan and Australia)
Complicated Structures:
Normal Fixed
Normal Floating
Normal Zero Coupon
Callable Fixed
Callable Floating
Callable Zero Coupon
Callable Step-up
Callable Defaulted
Sinkable Fixed
Sinkable Floating
Extendable Fixed
Call Extendable Fixed
Convertible fixed
Convertible call Fixed / Floating
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7. Liquidity in Corp. Bonds
Bloomberg
1/17/2019
Liquidity in Corp. Bonds
Average number of corporate bonds traded in last 7 days:
Malaysia
India
Thailand
Korea
No clear cut guideline for corp. bond valuations
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8. Information Disclosure
Bloomberg
1/17/2019
Information Disclosure
Most of the corporate bonds are private placement:
Lack of easy availability of information and this leads to illiquidity in the long run.
Availability of bond structure
Ratings information
Treatment of unrated papers
Lack of clarity on issuer v/s program rating.
Availability of rating information
Methodology of Yield calculators
Each lead manager structure the issues in his / her own way.
No public available of Calculation information and convention.
Price availability for all the bonds
Growth of structured bonds
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9. Your Thoughts and Ideas
Bloomberg
1/17/2019
Your Thoughts and Ideas
Better Bond Valuation Models.
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