| Summary: | 博士 === 國立政治大學 === 金融研究所 === 93 === This thesis studies valuation, hedge and risk management of capped equity-linked and principal-protected notes by means of the following essays:
(1) Design, Valuation and Comparison of Capped Equity-linked and Principal-protected Notes
(2) Valuation and Risk Measurement of Capped Equity-linked and Principal-protected Notes with Path Dependence
(3) Risk Management of Foreign Assets
Capped equity-linked and principal-protected notes are similar with barrier options. There exists delta jump as stock price or growth rate reaches the barrier. But previous studies about equity-linked and principal-protected notes with a restricted growth rate of stock price never explicitly discussed how the delta jump could be solved. In my first essay, I present a new design for capped equity-linked and principal-protected notes and add an adjustable factor to growth rate of stock price in such a way that the adjustable factor narrows the gap between the current stock growth rate and the capped stock growth rate and thus really reduces the magnitude of the delta jump and hence lowers the hedging cost for brokers.
Recently, the focus of previous studies about principal-protected notes has been on either the restriction on the rate of stock return or the path dependence on the underlying asset, but not both in the same context. In my second essay, I develop a model on the capped, equity-linked and principal-protected notes with path dependence. There are two issues in this article. The first issue is valuation on the capped, equity-linked and principal-protected notes with path dependence. I find a closed-form approximation using the 2nd-order Taylor approximation and the method of Vorst (1992) that has higher accuracy than binomial tree model as maturity time or volatility becomes large. The second issue is risk measurement. I use VaR model to evaluate market risk of the principal-protected notes, and employ seven univariate time series models to forecast volatility and examine the accuracy.
Additionally, investors may well encounter potential loss as the prices of financial products are reduced in the secondary market. The VaR is mainly concerned with the downside risk and becomes a standard measure of financial market risk that is increasingly used by investors. But if we want to apply 〝textbook〞formulation to risk management of foreign assets, there leaves exchange rate risk out of consideration. Therefore, I extend the work by Kupiec (1999) to present VaR formula with exchange rate risk for foreign assets and then to manage market risk usefully.
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