Lu, Yinqiu; Neftci, Salih N. - International Monetary Fund (IMF) - 2008
Many developing economies are heavily exposed to commodity markets, leaving them vulnerable to the vagaries of … international commodity prices. This paper examines the use of commodity options-including plain vanilla, risk reversal, and barrier … on a specific commodity price. By extracting commodity price risk out of the bond, such an instrument insulates the bond …