Pricing the Feasible Trading Regions of CatEPut under Revised Trade-off Theory and the Twin-Tree Structure Model

• Main Authors: Yang, I-Hsuan, 楊易軒
• Other Authors: Dai, Tian-Shyr
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/tbv3z7

碩士 === 國立交通大學 === 財務金融研究所 === 107 === This study proposes the Twin-Tree Structure Model to model asset value and price an American-type with the early exercise Catastrophe Equity Put options (CatEPut). In this thesis, we explore the Reference Entity Risk with price endogeneity. Then discuss an additional insured clause set when buyer-company default can exercise the options (ggcanexer=1) or the firm default will miss the right to execute its contract (ggcanexer=0). We revised Trade-off Theory's equation to deal with firm value would be negative in numerical programing and further analysis of option's issuer cost, variations of buyer company's equity value, debt value, total bankrupt cost and loss compensation. Finally, we research the highest price which buyer willingness to pay. Also, we can construct the price of trading region of both parties. Through the numerical analysis we observed that the company with high leverage ratio (unhealthy firm) prefer to purchase CatEPut to ensure the stable operation.