Counterparty Risk of Covered Warrant:Application of Merton Jump Copula Model

• Main Authors: Tzu-fang Wang, 王姿芳
• Other Authors: Yi-chen Wang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/00194649292676785005

碩士 === 國立高雄第一科技大學 === 金融理財研究所 === 99 === In this paper, we analyze Taiwan Index European Covered Call Warrant which issued and expired between January 2009 and December 2010. We select the warrants of the same underlying assets at the time issued by different security firms in the above period and divide them into four groups. Under the assumption of random jump is lognormal distribution in Merton(1976),we put One Factor Gaussian Copula structure into Merton jump model and derive a Merton-Jump-Copula Model to price covered warrants. A Monte Carlo Simulation and Calibration Method is used to estimate the counterparty risk premium of the sample warrants, and a comparison of the counterparty risk premium with different security firms on issuing the same underlying covered warrants in the same time period. Furthermore, the jump volatility is exogenously enlarged to discuss the sensitivity of jump volatility on counterparty risk premium. Our empirical results show that there is no obvious evidence that counterparty risk premium of covered warrants within groups between security firms exists an order. Moreover, the magnitudes of counterparty risk premium are affected by the remaining maturity.