A General Framework for Valuing Loan Guarantee of BanksUsing Barrier Option Approaches

• Main Authors: Yi-shan Hsieh, 謝依珊
• Other Authors: Chuang-Chang Chang
• Format: Others
• Language: en_US
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/35170654301608774234

碩士 === 國立中央大學 === 財務金融研究所 === 96 === Our study focuses on a general framework for valuing the loan guarantee of banks.Based on Chen et al. (2006), the bank’s asset portfolio consists of several loans and the banks lend several correlated corporate firms the loans. So that the bank’s asset value is the truncated structure. The corporate firm’s asset volatility is the primitive risk in the bank’s asset portfolio. Our model is analyzed under a multiplecorporate firm , multiple-bank , and multiple-guarantor framework. The guarantors has the duty to guarantee the banks’ debt value. After considering the barrierm compensated policy and immediate examining system, we estimate the value of loan guarantee using the American barrier option approach. We compare the value of loan guarantee using American barrier option approach to that using Europe option and American option approach. We carry out simulations to investigate how the important parameters of corporate firms, banks, and guarantors affect the values and default probability of loan guarantee.