| Summary: | 碩士 === 輔仁大學 === 金融研究所 === 95 === With a steadfast development of financial engineering techniques and the global financial market increasingly without boundaries, the conventional financial laws and regulations and monitoring methods to fall behind what is needed in reality. The local financial institutions, fallen short of development history, capital, market scale, technology or database scale, are still ominously lax in new derivative product business to the European and U.S. markets.
In the domain of financial derivatives, besides more conventional pegs of equity, bonds and foreign exchange , credit derivatives are considered to fall under a newer form of development. The reason of its emergence can be attributed not only to a series of major financial incidents in the 70s to the 90s, but the induction of the new Basel II Convention .
Credit default swap, total return swap and credit spread option are common instruments in international financial markets. With these instruments, financial institutions can transfer credit risk without transferring the ownership of reference assets. Besides transferring default risk, people can trade with credit default swap in speculation motive. The function of total return swap can transfer both default risk and credit spread risk.
Firms can lock in funding cost by buying credit spread option.
For improving the efficient of asset management, local financial institutions often deal with credit risk by securitization. Comparing with the similar products on the international market, the securitization products in Taiwan have had great improvements in the declaration of asset pools, the scope of credit rating, valuation ability of credit derivative and the liquidity of the secondary market. And this will further help to enhance the growing and the development of the credit derivative market in Taiwan.
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