diff --git a/_posts/2020-04-02-pandemic-bonds.md b/_posts/2020-04-02-pandemic-bonds.md index 4b38513..80c1795 100644 --- a/_posts/2020-04-02-pandemic-bonds.md +++ b/_posts/2020-04-02-pandemic-bonds.md @@ -71,14 +71,20 @@ Assuming the die is fair, and that we play this game for a very long (infinite) With that out of the way, what the heck are pandemic bonds? -The [Pandemic Emergency Financing Facility](https://en.wikipedia.org/wiki/Pandemic_Emergency_Financing_Facility)(PEF), also known as a "pandemic bond", is a very special financial contract. The basic structure of the bond is simple: +The [Pandemic Emergency Financing Facility](https://en.wikipedia.org/wiki/Pandemic_Emergency_Financing_Facility)(PEF), also known as a "pandemic bond", is just a special financial contract. The basic structure of the bond is simple: - People give the World Bank money. - If there is no pandemic: - - Every month, the World Bank pays interest on that money + - Every month, the World Bank pays (a lot of) interest on that money - On July 15, 2020, all the money is given back - If there is a pandemic: - No further interest is paid on the money - The World Bank gets to keep the money -If you're interested in more details, the [bond prospectus](http://pubdocs.worldbank.org/en/882831509568634367/PEF-Final-Prospectus-PEF.pdf) has you covered; interest rates, definition of what a "pandemic" is, etc. \ No newline at end of file +If you're interested in the specifics, check out the [bond prospectus](http://pubdocs.worldbank.org/en/882831509568634367/PEF-Final-Prospectus-PEF.pdf) for interest rates, a definition of "pandemic", and so much more. + +But the most interesting thing in this contract is how *both sides (lenders and the World Bank) benefit*. + +We'll look at this from the World Bank's perspective first. The World Bank is concerned about [the possibility of a pandemic](https://www.youtube.com/watch?v=6Af6b_wyiwI). + +If you're lending money to the World Bank, this is a potentially great investment opportunity. Sure, there's a potential you lose everything, but *assuming a high enough interest rate*, this is a hard deal to pass up. \ No newline at end of file