Analysis of structured note valuationinverse floater notes and range accrual notes

• Main Authors: I-Chun Sun, 孫亦君
• Other Authors: Chu-Ying Lin
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/18185941023848856268

碩士 === 東吳大學 === 企業管理學系 === 95 === Abstract Due to the economics environment change faced by Taiwan financial institutions in the past few years, NTD interest rates stayed at historical low persistently. In order to stimulate the economy, Taiwan Central Bank has lowered the interest rates for 14 times, and the target rates stayed at historical low for more than 16 months. Taiwan Central Bank started to raise interest rates in October 2004 when the economy started to recover. Even though the CBC target rates have been raised for 150 basis points, interest rates were still relatively low. Since then, domestic financial institutions started to offer structured products to meet the investors’ demand for yields which can be higher than the deposit rates or traditional fixed income products. Structured products combined fixed income products and derivative products. Those kinds of products which combined traditional bonds and derivative products are so called “structured bonds” generally. In this research, structured bonds were decomposed into straight bonds and interest rate derivatives. The Zero Curve was calculated by the Bootstrapping method and theoretical prices of interest rate derivatives were derived from the CIR and Monte-Carlo Simulation models. There are 7 examples of structured bond theoretical prices which are compared with market prices to check if theoretical prices match the real market prices or justify the mark-to-market values. Besides, it is also examined that if yearly volatility of interest rates and long-term average interest rates would affect structured bond theoretical prices. This research obtained results are as follows: 1. Structured bonds theoretical prices which calculated with term-structured model and Numerical methods are lower than the market prices. The difference should come from the demand and supply issues and shows the calculating models can not reflect the change of the demand and supply of structured bond market. 2. Empirical results show that comparing to the yearly volatility of interest rates, long-term average interest rates have more influences on the structured bond prices, which means that investors’ expectation of interest rates will affect the demand of structured bonds.