Case | HBS Case Collection | March 1996

Telmex PRIDES

by Kenneth A. Froot and Mark Seasholes

Abstract

The case examines an issue by a Mexican development bank of PRIDES written on Telmex stock. PRIDES are a dividend-enhanced security which are exchangeable into shares of the underlying stock. The focus is on pricing these instruments, which involve large peso-denominated payments at maturities beyond that of the Mexican yield curve. Further, the optionality of the PRIDES is interesting to analyze.

Keywords: financial derivatives; securities; International Finance; Banks and Banking; Financial Instruments; Valuation; Mexico;

Citation:

Froot, Kenneth A., and Mark Seasholes. "Telmex PRIDES." Harvard Business School Case 296-009, March 1996.