Commercial papers
Posted: December 5th, 2010, 12:48 pm
by alanxyz
This is probably too elementary for you guys - how would you price a commerical paper? By discounting it I guess, but which curve would you use?
Commercial papers
Posted: December 6th, 2010, 11:55 pm
by acastaldo
I would price it based on the credit quality of the issuer, of course. Starting with the credit rating issued by credit rating agencies, but doing your own homework since the last few years we found out that Moody's and S&P are not always right... I would get an average commercial paper i.r. curve for issuers with similar credit quality and use that. For example for the best rated U.S. companies (A1+) right now it is:1 day 0.18%15 days 0.20%60 days 0.24%4 mon 0.30%6 mon 0.34%(Source: Bloomberg)