The value of base rate options in the Eurocredit market

Article Abstract:

An important decision for buyers of Eurocredits is whether to choose a rate base tied to the U.S. prime rate or the London Interbank Offer Rate (LIBOR). The value of these options is determined by spread differential, the variability of the difference between the two rates, and the pricing period. An empirical analysis is included for the period from October 12, 1979 to December 2, 1983, showing that U.S. prime rate base options were not much use to borrowers, and that LIBOR would have been the best rate to choose. In general, it is best to choose the shortest pricing period when the borrower has this option.

Analysis, Valuation, Eurocurrency market, Interest, Interest (Finance), Prime rate

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How Does Inflation Affect a BHC's Rate of Return?

Article Abstract:

Reports of bank holding companies' (BHCs) earnings are distorted by inflation. The Financial Accounting Standards Board (FASB) requires constant dollar information disclosure for some. Return on equity has been used in various models. No one model is perfect. Some deal with inflation's impact on net income as a measure of current performance and its effect on the equity position. Models and figures are included.

Models, Bank holding companies

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On Estimates of Long-Run Rates of Return: A Note

Article Abstract:

An estimator is provided to gauge asset performance over a long period from measured returns over the short term. A wrap-around overlap estimator is chosen for its efficiency at moderate cost. If a large amount of data is available, a simple unbiased estimator may be used.

Performance

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