Rethinking Valuation and Pricing Models

35

Revisiting Interest Rate Pricing Models from an Indian PerspectiveLessons and Challenges

Rituparna Das^∗ and Michael C.S. Wong^∗∗

^∗National Law University

^∗∗City University of Hong Kong

Chapter Outline

35.1 Introduction

35.2 Success and Lessons

35.2.1 Demand for Repo in Corporate Bonds

35.2.2 Success of Collateralized Lending and Borrowing Obligations vis-á-vis Repo

35.3 Challenges

35.3.1 Use of Regression

35.3.2 Use of Spline

35.4 Conclusion

References

35.1 Introduction

Two of the primary purposes that the Indian debt market reform started with were: (i) Inducing the government to borrow at the market rate and therefore (ii) helping the evolution of benchmark rates. However, in an emerging economy, the debt market in its initial stage requires ...