With the NSEIL's strong focus on debt market segment and the long felt need to create standardized market practices, NSEIL has embarked upon developing products that will be used by the market participants to address themselves to issues relating to this market segment. Keeping in mind its research initiative, innovations and the focus on the debt market segment that has witnessed substantial growth during last few years, the Exchange has felt a long standing need for providing a valuation product to market participants and institutions to value their portfolio of sovereign papers.

In its continuing effort to innovate, the Exchange has developed a Zero Coupon Yield Curve (ZCYC) that will help in valuation of securities across all maturities irrespective of its liquidity in the market in so far as valuation of financial instruments are concerned, more particularly the sovereign papers. The product aims to create uniform valuation standards in the market. The product has been developed keeping in mind the requirement of the banking industry, financial institutions, mutual funds, insurance companies, etc. that have substantial investment in sovereign papers. The product aims to help in improving Asset Liability Management of institutions with realistic valuations of portfolio of sovereign papers.

It has been felt that credibility would be an important issue in the development of the product and hence methodology for the estimation should be statistically sound and accurate. The product has been developed using Nelson-Siegel model to estimate the term structure of interest rate at any given point of time. The product has been put into testing at the Exchange using its daily WDM trades data and generates satisfactory results that may be used by market participants.

The product has been developed by Dr. Susan Thomas, IGIDR, and NSEIL research team (Dr. Gangadhar Darbha, Dr. Sudipta Dutta Roy and Dr. Vardhana Pawaskar, Consultants to NSEIL being the main resource persons). The product has been developed keeping in mind the emergence of a scientific forward curve for the market that will be useful in developing derivative products and STRIPS in the emerging scenario.

The product will be disseminated through e-mail, BBS, NSE website (nse-india.com). Your feedback would help us to make this product more robust.

Any queries can be addressed to debtmarket@nse.co.in or golak@nse.co.in