Professional Documents
Culture Documents
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD. (FORMERLY BONDWEB MALAYSIA SDN BHD) - All rights reserved.
* Long term PDS are notes that are above 1 year in tenure and would naturally exclude commercial papers, BNM notes, repos and other related papers
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
The Need
Daily valuation of bond portfolios for NAV
calculation and portfolio valuation
Current method
Quotes from brokers or banks, a few via
internally generated models bias?
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
9BPA valuation approved by the SC may revitalize the bond market using mark-to-market
prices as benchmark by publicly announcing them
9Marking-to-market system provide strategy alternatives to traditional hold-to-maturity
strategies.
Revitalizing
Revitalizingthe
the
Primary
PrimaryMarket
Market
for
forBonds
Bonds
Promoting
PromotingNew
New
Product
Product
Development
Development
9BPAs transparency in the methodologies being used will spur the evolution of the bond
market with further advance pricing methodologies
9When advance pricing methodologies are established, it will encourage more bond
offerings and more active trading of these products in the secondary market.
Improving
Improvingthe
the
Soundness
Soundnessofof
Financial
Financial
Institutions
Institutions
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Delivery Channels
For 2000+ stocks delivered via a .csv (excel) file daily at 6.00 pm
BOND CODE
MO060001
MS03001S
MS03002H
MZ98005A
MS04003H
MY050003
MX060002
DE060266
KV96101E
PS93004H
KV95001T
GG04001F
GI03001W
GI04003N
GK04002F
CI02014T
CI02025A
CI03007S
CK02006N
DN97062W
DN97099H
DS97120S
QK00001W
QI03001A
ISIN CODE
MYBMO0600019
MYBMS03001S9
MYBMS03002H0
MYBMZ98005A5
MYBMS04003H7
MYBMY0500036
MYBMX0600028
MYBDE0602668
MYBKV96101E2
MYBPS93004H4
MYBKV95001T3
MYBGG04001F7
MYBGI03001W1
MYBGI04003N5
MYBGK04002F9
MYBCI02014T5
MYBCI02025A1
MYBCI03007S0
MYBCK02006N0
MYBDN97062W6
MYBDN97099H9
MYBDS97120S5
MYBQK00001W8
MYBQI03001A5
BOND NAME
VALUE DATE MTM PRICE MTM YIELD LAST PRICE LAST YIELD LAST DATE DURATIONCONVEXITY
MGS 1/2006 4.262% 15.09.2016
17-Jan-07
103.89
3.78
103.85
3.78
16-Jan-07
7.79
72.77
MGS 1/2003 4.41000% 29.01.2018
17-Jan-07
105.42
3.8
0
0
8.58
89.86
MGS 2/2003 4.24000% 07.02.2018
17-Jan-07
103.9
3.8
0
0
8.66
91.06
MGS 5/1998 8.000% 20Y 30102018
17-Jan-07
139.47
3.81
0
0
8.23
87.15
MGS 3/2004 5.734% 30.07.2019
17-Jan-07
118.76
3.84
118
3.91 11-Dec-06
9.04
103.67
MGS 3/2005 4.837% 15.07.2025
17-Jan-07
110.58
4.02
110.59
4.02
10-Jan-07
12.43
199.78
MGS 2/2006 4.709% 15.09.2026
17-Jan-07
108.74
4.06
108.75
4.06
16-Jan-07
12.78
216.26
CAGN 1/2006 364D 25.05.2007
17-Jan-07
98.7
3.76
98.65
3.76
12-Jan-07
0.35
0.24
KLIA 0.000% 30.01.2016 PN
17-Jan-07
128.29
3.99
128.27
3.99
15-Jan-07
6.65
56.4
YTL POWER 10.000% 30.10.2008 PN
17-Jan-07
110.58
3.82
0
0
1.64
3.61
KLIA 7.750% 17.01.2015 PN
17-Jan-07
126.63
3.85
121.06
5.45 04-Mar-02
6.21
47.52
GII 1/2004 0.00000% 15.06.2007
17-Jan-07
98.62
3.43
98.42
3.7
08-Jan-07
0.4
0.32
GII 1/2003 0.00000% 31.03.2008
17-Jan-07
95.84
3.57
95.35
3.61 27-Nov-06
1.18
1.98
GII 3/2004 0.00000% 29.10.2009
17-Jan-07
90.4
3.66
86.93
4.15 24-May-06
2.73
8.81
GII 2/2004 0.00000% 30.09.2011
17-Jan-07
84.1
3.72
83.85
3.71 14-Dec-06
4.62
23.6
SMC 14/2002 23.04.2007
17-Jan-07
100.13
3.62
99.25
4.82 28-Dec-05
0.26
0.14
SMC 25/2002 22.08.2007
17-Jan-07
100.14
3.68
100.05
3.98
04-Oct-02
0.57
0.62
SMC 7/2003 11.04.2008
17-Jan-07
99.67
3.78
99.7
3.73 01-Dec-06
1.18
2.01
SMC 6/2002 26.02.2009
17-Jan-07
101.2
3.82
99.91
4.45 28-Dec-05
1.97
4.99
PERWAJA 0.000% 31.07.2007 PN
17-Jan-07
102.5
3.52
107.47
3.59 29-Nov-05
0.51
0.52
TENAGA 0.000% 01.10.2007 PN
17-Jan-07
102.86
3.81
103.73
3.81
30-Oct-06
0.67
0.79
TENAGA 0.000% 01.10.2012 PN
17-Jan-07
119.85
4.33
119.63
4.74
04-Apr-06
4.57
25.99
KHA1/00 1.02B 0-CP 7YR 20/3/2007
17-Jan-07
99.4
3.57
98.41
3.65
10-Oct-06
0.17
0.06
KHA1/03 1B 0-CP 5Y 18/6/08
17-Jan-07
94.96
3.68
93.87
3.8
11-Oct-06
1.39
2.63
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Korea
Thailand
Egypt (in development)
Mexico
Malaysia
Indonesia (in development)
Mexico
9Two price vendors under
the purview of Banco De
Mexico
Malaysia
9Bondweb Malaysia Sdn Bhd
Thailand
9Thai Bond Market Association (SRO)
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Korea
9Korea Bond Pricing
9KIS Pricing, Inc
9NICE Pricing Services, Inc
Audited
Pricing performance :
Expertise :
System:
Shareholders :
No controlling party
RM 10 million
Bond Pricing Agency Malaysia has met and exceeded these requirements, and was appointed
as the first registered Bond Pricing Agency on 18th April 2006
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
BPAM is already supporting the implementation of the Basel II, IAS 39 and Risk Based
Capital requirement for banks and insurance companies
Therefore, BPAM is fully compliant to meet the needs of Unit Trust Management
Companies, Asset Managers and Financial Institutions with regard to the provision of
Fair Value Bond Prices
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
BPAM Clients
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
BPAM Clients
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Pricing Process
BPAMs Bond Pricing Services
9 BPAM provides valuations on a daily basis at INDIVIDUAL bond level
9 A comprehensive data collection, validation, pricing and dissemination process is in place to
ensure consistent and market neutral valuations
9 The bond pricing process is transparent and uses global standard pricing models
9 The models are customized to meet the unique needs of the Malaysian market
9 BPAM prices unlisted MYR bonds (Conventional and Islamic). For now we do not price short
term papers, unrated bonds, loan stocks and listed bonds
9 We incorporate a market feedback mechanism in the event where there are disputes or queries
on the prices
9 Intimate local knowledge of the instruments and market structure is vital to ensure credibility of
the BPA
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Pricing Methodology
Bond Pricing Approach Current Industry Practice and the Assumptions
YTM
YTMMatrix
Matrix/ /
Curve
CurvePricing
Pricing
Individual
Individual
Quotation
Quotation
Approach
Approach
Model
Model
Approach
Approach
(Mark
(MarkTo
To
Model)
Model)
Pricing Method
Granularity
Quote Driven
Curve Pricing
Individual Quotation
Approach
Quote Driven
Individual Bond
Model Approach
Theoretical
Individual Bond
Hybrid Approach
Hybrid
Individual Bond
Hybrid
Hybrid
Approach
Approach
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Pricing Methodology
BPAMs Pricing Methodology An Overview
Bond Price = f ( Benchmark Rates
Y
i
e
l
d
Credit Spread )
Credit Risk
Liquidity
Risk
Risk
Term to Maturity
Segmentation Cube
Quotations
Individual Bonds
Trades
Measuring the
Market Price
Of Risk
Individual Bond
Valuation
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Pricing Process
Price All Bonds
Pricing for un-traded or rarely traded bonds
9 Obtain a base spread from the past real transaction
data
9 Track the change of spread over time
9 Estimate the spread of the bond relative to
changes in the yield curves and other peer group
Y
i
e
l
d
Yield curve(AA)
20bp
Spread(AA)
Real Transaction
Evaluation Yield
20bp
15bp
15bp
Ev
o
ati
alu
ate
D
n
Term
to M
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
atur
it y
Pricing Methodology
Bond types identified and priced by BPAM in the MYR market:
Callable Amortizing Bonds with Secondary Notes Callable Stepping Bonds
Callable Stepping Amortizing Bonds
Discount Bonds
Convertible Stepping Bonds
Bullet Bonds
Callable Bonds with Secondary Notes
Fixed Rate Bonds
Convertible Bonds with Secondary Notes
Amortizing Bonds
Callable Bonds
Convertible Bonds
Exchange Bonds
Bond with Warrants
As of April 2008:
Fixed Rate ABS
Total stocks in the market:
2693
Callable ABS
Fixed Rate MBS
Priced by BPAM:
1908
Callable MBS
Stepping FRB
Floating Rate Notes
Floating Amortizing Notes
Floating Rate ABS
Floating Rate MBS
Bond with Secondary Notes
Amortizing Bonds with Secondary Notes
Callable Amortizing Bonds
Stepping Amortizing Bonds
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Pricing Methodology
Price All Bonds
Apply relevant bond type price formula
Eg1 : Fixed coupon bonds with regular period
1
c
F
F
100
f
+
AI
1
( k 1+ D 2 )
y
y
1
( n 1+ D 2 )
D
k =1
D
(1 +
)
(1 +
)
100 f
100 f
n
c
1 FIF
c
1
F
F
n
F
f
E
f
100
100
+
+
AI
2
2
D
D
y
y
y
1
1 ( k 1+ E )
1 ( n 1+ D 2 E )
E
k =2
(1 +
)
(1 +
)
(1 +
)
100 f
100 f
100 f
Notation
f
c
F
y
AI
D
D2
n
E/U
c
c
1
1 LIF
F
F
n1
F
f
f U
100
100
+
+
AI
LIF D 2
LIF
D
2
y 1 (k 1+ D)
y 1 (n1+ U + U )
y 1 (n1+ U +D2U )
k =1
)
(1 +
(1+
(1+
)
)
100 f
100 f
100 f
FIF / LIF
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Descriptions
Coupon payment frequency in a year
Coupon rate
Face amount = Notional
Yield *
Accrued Interest
No. of days in one regular coupon
period
No. of days between the value date and
the next coupon Date
Last coupon period
No. of days between the pseudo issue /
real last coupon date and the real first
coupon / pseudo maturity date (short
first / last coupon)
No. of days between the pseudo issue /
pseudo last coupon date and the
pseudo first coupon / pseudo maturity
date (long first coupon)
No. of days between the real issue date
/ real last coupon and the real first
coupon / real maturity date
(Short First / Last Coupon Bond)
No. of days between the real issue /
pseudo last coupon date and the
pseudo first coupon / real maturity date
(Long First / Last Coupon Bond)
I
I
I
I
Interest
Payment
Principle
Payment
Legal Maturity
c
1
F
F
100
f
P=
+
AI
y 1 ( k 1+ D 2 D )
y
( n ' 1+ D 2 )
1
k =1
D
(1 +
)
(1 +
)
100 f
100 f
n'
9 Current market practice is to price option embedded bonds to the first call
9 Cash flow after first call is discarded
9 Assumption is flawed
9 There are also no difference in pricing of American, European and Bermudan option
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
P(T)
P(T+1;mid)
If the option is call and the exercise price at T is C, then the price of
option bond at T can be determined as follows:
P(T+1;dw)
2) Hull and White suggested a two-stage method to generate the interest rate tree using the basic formula:
dr = [ (t ) ar ]dt + dz
(t )
: the coefficient
of long term mean
a
: mean speed
: the volatility
of short term interest rate
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
7 a 2 j 2 t 2 3ajt
+
6
2
1
2 2
Pm = a j t 2 + 2ajt
3
1 a 2 j 2 t 2 ajt
Pd = +
6
2
Pu =
*
*
the process dr = ar dt + dz .
1 a 2 j 2 t 2 ajt
+
6
2
2
Pm = a 2 j 2 t 2
3
1 a 2 j 2 t 2 + ajt
Pd = +
6
2
Pu =
Assumption: (t ) = 0 , r (0) = 0
*
*
First Stage Model: dr = ar dt + dz
*
*
Parameter Setting: R = 3t , t = it , R = jR
0.184
0.816
j max : Minimum integer between
and
, j min = j max
at
at
Tree expansion: If the short-term interest reaches the two boundaries
j max
Pu , Pm ,(Pd
j min
or goes down
, then the probabilities to up, middle, down
1 a 2 j 2 t 2 + ajt
+
6
2
1
Pm = a 2 j 2 t 2 2ajt
3
7 a 2 j 2 t 2 + 3ajt
Pd = +
6
2
Pu =
) will change.
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
*
r-tree
so that the initial term structure is exactly matched. The approach is to
*
set the interest rates on r-tree at time it to be equal to the corresponding interest rates on r -tree plus
(it ) while keeping the probabilities the same. The procedure is to calculate s iteratively so that the initial
term structure is matched.
*
Define (t ) = r (t ) r (t ) d (t ) = [ (t ) a (t )]dt
ln Qi , j e jRt ln Pi +1
j
t
where P is the price computed from the current term structure of interest rate
j
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Interest
Payment
Principle
Payment
Islamic
SN
SN
Descriptions
Payment frequency in a year
Cash flow rate
Face amount = Notional
Yield
No. of days in one regular coupon period
No. of days between the value date and the next payment date
Last payment period
Clean Price
SN
SN
PN
PN
Secondary
Note
Primary
Note
9 Cash flow rate in Islamic structure derived as the ratio between the
secondary note amount and the primary note amount
9 Primary amount is the face amount
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Rather than relying on the performance of the underlying assets, Islamic bonds are currently
priced as per their conventional counterparts and almost arbitrarily.
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Investors
KLSSB issues
Sukuk and
receives
proceeds in
return
Proceeds
from PU for
Sukuk
redemption
and profit
payments
Trustee
Trustee
overseeing the
Musyarakah
Musyarakah
partners
appoint
KLSSB as the
Project Agent
KLSSB
KLSSB
Put
Option
4
Purchase Undertaking (PU)
KFH
Put
Option
terms and
conditions
Distributable profit to be
shared semi-annually
based on an agreed profit
sharing ration of 99%:1% to
KLSSB and Sukukholders
Stake of Musyarakah
partners based on their
capital contribution of 74:26
from KLSSB (in kind) and
Sukukholders (cash)
IH
IHL
I0
ILH
IL
ILL
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
Delivery
Discount
Immediate
Negotiated
Mark up
Deferred
End of
Period
Lease
Payment
Price
Delivery
Advance
Discount
Immediate
Advance
Discount
Advance
Staggered
End of
Period
Negotiated
Mark up
Deferred
End of
Period
Staggered
End of
Period
Negotiated
Mark up
Staggered
End of
Period
Equity
Usufruct
Fixed
Fixed
On Issuer
Floating
Floating
On the
Business
Payment
Price
Payment
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD (FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights
d
THANK YOU
No. 17-8 & 19-8 , The Boulevard, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia
Tel: +603 2772 0888 Fax: +603 2772 0808 Email : enquiries@bpam.com.my
Copyright BOND PRICING AGENCY MALAYSIA SDN.BHD.(FORMERLY BONDWEB MALAYSIA SDN BHD). - All rights reserved.