The business structure of the water industry underwent two major changes, one in 1972 and the other in 1989. The overall structure established at privatisation in 1989 has not changed dramatically since.
The water industry in England and Wales accounts for approximately 90 percent of the total UK industry, directly employs 32,000 people and has a turnover of over £6 billion per year. The water service and the sewerage service are of similar sizes on a turnover basis.
Within the money market, there is one segment of particular interest for central bankers as it is directly (or indirectly) affected by the liquidity policy of the central bank: the overnight market. For central banks which implement monetary policy by steering short term money market interest rates, the overnight interest rate plays a key role in signalling the stance of monetary policy. It is therefore essential for the overnight interest rate to stand close to the key policy rate determined by the decision making body of central banks and for its volatility to remain well contained.
This paper presentsa methodology for extracting credit pricing information from the prices of callable corporate debt. Until recently, empirical research on corporate bond pricing has avoidedadirect treatment of callable corporate bonds. In practice, however, callable debt is popular. As of April 2003, the Fixed Investment Securities Database (FISD (2002)) contained a total of about 23,950 fixed-rate U.S. corporate debentures, of which roughly 60%in number and 42%in offering amount were callable. In order to extract credit-quality information from yield spreads, one must treat the simultaneous effects of credit risk and optionality.
