A Study on the Dynamic Hedging Strategy of Convertible Bond Asset Swap Option

• Main Authors: Chien-Tao Lee, 李建道
• Other Authors: Jan-Chung Wang
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/24555010046960582829

碩士 === 國立高雄第一科技大學 === 金融營運所 === 93 === Abstract Due to the opening of financial markets and the development of financial engineering, the financial products are getting diversified, such as TX option, Taiwan 50ETF, Taiwan 50 futures, stock option, warrant, structured notes and convertible bond asset swap which the investors can reallocate their holding assets according to product characters, capital character and personal preference. The convertible bond is one of those financial products. The investors keep the bonds to avoid the price risk when the stock price drops. On the contrary, when stock price rises, there exists convertible value, the investors can either end up with selling the bonds or convert bonds into stocks and sell the stocks. However, some bond issuers encountered management and financial crisis in recent years. This causes the outstanding convertible bond asset swap option to be widely accepted by investors. The spirit of this study is based on the strategy of going long in the CB asset swap option and shorting some fix ratio of certain securities. To avoid the security price dropping, this ratio would dynamically rebalance according to the change of stock price. In other words, this study investigates the practical possibility of dynamic hedging of CB asset swap option according to the actual stock performance and the change of CB price.