| Summary: | 碩士 === 國立高雄第一科技大學 === 金融營運所 === 93 === In recent years, the asset value of investor shrink dramatically due to economic depression and the downgrading of corporation’s credit quality. Investors use credit derivatives to hedge their primitive asset’s credit risk, and also use credit derivatives to increase their expected return. In this study, we provide a pricing mechanism to evaluate the value of credit derivatives and bond with credit derivatives, which is called credit linked notes. We use Black, Derman, and Toy (1990)’s setting to construct the term structure of interest rates, and also adopt Merton (1974) model to find out corporation’s default probabilities.
Our study shows that: given the values of CDS, the most popular credit derivatives, as zero, we implicit find the CDS premium. The higher probability of default the premium of credit default swaps is higher and the price of the credit linked notes is higher. While the degree of increase of stock price is higher, the premium of credit default swap is lower, and the price of the credit linked notes is higher. The higher percentage of the return, the premium of credit default swap is lower, and the price of the credit linked notes is uncertain. While the volatility of the term structure of interest rate is higher, the volatility of premium of credit default swap and the price of the credit linked notes are higher. While the coupon rate of the high quality bonds and the premium of credit default swap are higher, the price of the credit linked notes is higher.
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