The Valuations of CBAS and Options on CB

• Main Author: 李明達
• Other Authors: 林忠機
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/47382473108947032888

碩士 === 東吳大學 === 商用數學系 === 92 === To satisfy investors’ needs and increase the liquidities of convertible bond (CB) markets,Taiwan allows CB brokers to strip a CB into a credit component (CB Asset Swap, CBAS) and an equity component (call on CB) and sell them individually to investors. It is extremely difficult to price CBAS and call on CB, since most CBs in Taiwan are issued with call options, put options, conversion price reset and special reset terms. Whether some of these options and terms are triggered will depend on the average underlying stock closing prices, which means a CB pricing is a path dependent option pricing problem. To construct a practical pricing model for CBAS and call on CB, this study develops a multi-factor Monte Carlo simulation approach, which can accurately and efficiently values CBAS and call on CB with the properties of multi-factor, stochastic interest rates, several embedded options, and stochastic credit spreads. Both the investors and the issuers of CBAS and call on CB can employ this model to analyze the risks and real values of these exotic financial products.