Modelling the uruguayan debt through gaussians models

Abstract

We model bond price curves corresponding to the sovereign Uruguayan debt nominated in USD, as an alternative to the official bond price publication released by the Central Bank of Uruguay (CBU). Four different Gaussian models are fitted, based on historical data issued by the CBU, corresponding to some of the more frequently traded bonds. The main difficulty we approach is the absence of liquidity in the bond market. Nevertheless the adjustment is relatively good, giving the possibility of non-arbitrage pricing of the whole family of nontraded instruments and also the possibility of pricing derivative securities.