MACAULAY DURATION AND MODIFIED MACAULAY MODELS IN PRICING, VALUATION AND RISK MANAGEMENT OF BONDS FOR TRANSPORT INFRASTRUCTURE FINANCE

Adeniyi Samson ONANAYE, Adeniyi OLUWAKOYA

Abstract

The role of bonds deployment in funding transport infrastructure projects cannot be overemphasised. In this paper, an investigation into Nigerian bonds used for the finance of transport infrastructure was carried out. The aim is to enhance better decisions that will improve participation and increase investors' confidence through assurance return on investment on the pricing, risks, valuation and the management of the bonds. The study reveals MD and MM offer reliable tool to enhance knowledge of the various types of bonds with their associated risks attached to specific Nigeria's bond. Macaulay duration and modified Macaulay duration models were employed to overcome risk management and for the Investor to have a clear expectant yield at the end of maturity date. The result offers a reliable feat in making better decisions relating to pricing, valuation and the management of any Nigerian bond both by individual investors and corporate organisations.

Keywords

Valuation, Risk Management, Bonds, Infrastructure, Governments, Transport.

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