Default Probability Analysis of Basket CLN

• Main Authors: Huei-Ting Li, 李惠婷
• Other Authors: Yijen Wang
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/67999639963046428095

碩士 === 國立高雄第一科技大學 === 金融營運所 === 97 === This thesis focused on the relevance between baskets of the credit default rate of credit linked notes and credit default relation of underlying bond. We use Brace, Gatarek and Musiela (BGM, 1997) to model the long-term interest rate tree, and utilize the evaluation formula of credit linked note to infer the invisible credit default rate of the basket of credit linked notes in release date. There are 288 of the credit default rate of the basket of credit linked notes, 10 industries of underlying bonds, and 24 of portfolio bonds to investigate in this thesis. Due to the discrepancy of the credit default relation in different portfolio bonds, we can link the credit default relation of portfolio bonds and the credit default rate of CDS together. The thesis use the model of Credit Metrics, KMV to assume the relationship of the rate of stock return instead of the credit default relation of debt financing company because the data of the credit default relation of portfolio bonds cannot be find. The thesis classified the credit linked notes into two parts: one is first to basket CLN, which means the credit linked notes break the contract when one of the investment combinations breaks the contract. The second type is Second to basket CLN, refers to that the contract will be break if there are two of the investment combinations break the contract at the same time. Empirical results showed it related to the negative correlations between the credit default relation of the bonds group which based on dual bonds and the credit default of the basket of the credit linked notes, and the credit default rate of the basket of the credit linked notes is lower than first to basket CLN. We allocated 288 investment combination by industry department after the first step of the classified, and found out that the credit default relation of the industry and industrial department has 56 percents are more than 0.3, so that the thesis would have industrial department in investment combination to decrease the credit default rate of credit linked notes.