Pricing Risky Bond Option When Option Writer's Credit Quality Displays Autocorrelation - The Case Study of Cosmos Bank

• Main Authors: Shih-ZongChang, 張世宗
• Other Authors: Yu-Hong Liu
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/43bz5h

碩士 === 國立成功大學 === 經營管理碩士學位學程(AMBA) === 105 === The default risk is that the company or individual cannot pay the contractor or principal liability risk, which is one of the many risks of the bond option investment level, is nothing more than the most important risk. In this study, the default risk refers to the bond or option writer cannot repay the debt due to the bond investors or the option of the buyer's financial losses. When the company defaults often appear deterioration phenomenon of credit quality, while the credit quality deterioration caused by non-instantaneous, and the company before the credit quality is highly correlated. Therefore, this study explores whether the risky bond option of the Cosmos Bank displays autocorrelation. It’s found that if the underlying asset return of Cosmos Bank displays autocorrelation is positive, the value of the MA (1) - type vulnerable call option would be higher than the non-autocorrelation Black-Scholes call option. On the contrary, if the underlying asset return of Cosmos Bank displays negative autocorrelation, the value of the MA (1) - type vulnerable call option would be lower than the non-autocorrelation Black-Scholes call option. If the value increases, the autocorrelation becomes more positive. Otherwise, if the value decreases, the autocorrelation becomes more negative. The numerical analysis found that, in consideration of the historical transaction records of the counterparty, the option writer Cosmos Bank possess default risk. The credit quality of the market participants is associated with the history of their transactions displays autocorrelated.