To Pre-warn Financial Collapse with Barrier Options

• Main Authors: Ting-hao Wang, 王亭皓
• Other Authors: Wen-kuei Chen
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/91023551105830972891

碩士 === 義守大學 === 財務金融學系碩士班 === 95 === As the economy situation sharply fluctuated, more and more corporations went bankrupt or were under restructuring caused by maladjustment, institutional investors have put more emphasis on the measures of judging financial crisis. If the asset value is lower than the total debt while debt is at maturity, the company will probably go bankrupt .The enterprise running with loans is like the shareholder signed the selling contract of call options to creditor, the underlying asset is assets value itself. Therefore, Merton (1974) advocated using European options to predict the financial crisis of enterprise. Besides, Brockman (2003) believes that the path of asset value is path-dependent. At the certain time before the debt is maturity, the assets value could be lower than total debts already. Therefore, Brockman advocated using the barrier option to construct a warning model of enterprise financial crisis. The study imitated Brockman''s barrier options by using the financial data from Taiwan''s listed enterprises from the year of 2000 to 2005 and constructed a financial crisis warning model for the domestic enterprise. The empirical evidence showed that the implied barrier price commonly existed in the financial statements of domestic enterprise, it also showed that the warning ability of the model became more powerful while the crisis was approaching. Furthermore, while the barrier options model combined with financial variables as a crisis warning mechanism, it can strikingly promote the overall validity