Pricing of Callable Defaultable Bonds
Date Issued
2004
Date
2004
Author(s)
Yang, Chung-Chih
DOI
zh-TW
Abstract
Abstract
The research related to credit risk is based on the pricing of corporate bonds, and then developed pricing methods about all kinds of credit derivatives. Recently, there are more and more corporations funding by issuing corporate bonds with embedded options. Therefore, it is important to valuing those corporate bonds with embedded options. Callable defaultable bonds can be viewed as straight bonds with call provision. So, when we are valuing callable defaultable bonds, we have to consider both default factors and call factors.
We use reduced form model to price callable defaultable bonds. And then, we mention that credit risk and liquidity risk both have great influence on the price of callable deafultable bonds. Therefore, we add liquidity adjustments into the pricing model of callable defaultable bonds. We find out the pricing model of callable defaultable bonds with liquidity, and develop the pricing model of putable deafultable bonds with liquidity. Empirical results show that the model with liquidity is better than the model without liquidity.
We have not found out that how liquidity risk could affect defaultable bonds and to what extent. In the end, we need more empirical studies and theories about the field to tell us the relationship between liquidity risk and credit risk.
Subjects
信用風險
可贖回債券
公司債
Corporate bonds
Credit risk
Callable bonds
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-93-R91724077-1.pdf
Size
23.31 KB
Format
Adobe PDF
Checksum
(MD5):15c6a28c754456feb08941e06c9f9183