| Summary: | 碩士 === 銘傳大學 === 財務金融學系碩士在職專班 === 93 === The major purpose of this study is to discuss the realistic relationship between the sensibility of bond price and credit rating, and to explain the reason of risky bond with high price volatility contains low criterion. We apply the matrix of 1988 to credit rating histories of S&P rated U.S. obligors from 1988-2001. We use the credit migration matrix at 1988 for comparing these matrices by simulation, focusing the analysis on the relationship between credit rating and price sensibility. Thereafter, we demonstrate quite different results by using matrix of 2001, which is far form the average matrix.
From the result of simulation with 7 credit ranks, 4 scenarios and 2 different years, it can be found that sum of total cash flow gets lower and its difference gets larger as ranking decreases. However, the duration is smaller in lower credit rank than in higher rank, and the difference become larger with rank decline. The result means that company with lower credit rank has higher coupon rate and lower risk, so the price sensitivity of bond is small. Almost all the variations including: rate, bond rate, maturity ... etc. show linear effect to price and sensitivity in the simulation, but only the variation of loss given rate impacts the result seriously has very non-linear effect. Furthermore, in some special credit matrix, the price and sensitivity may invert in down drift of credit rank. It means, the loss given default rate is a great key parameter in the research of bond price and sensitivity, and can be particularly studied in future.
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