Pricing the Credit Linked note

Abstract

本文主要利用 reduce-form model 以推導信用連結票券之封閉解。信用連結票券在歐洲近年來相當流行並且台灣政府已開始規劃國內金融機構發行此票券。此信用衍生性商品可視為固定收益證券與信用違約交換以組合而成。此避險工具可使發行者規避標的債權之風險，而且發行者能夠將信用風險完全轉移至票券持有人。本文也進行數值分析以觀察利率波動度、與利率相關之違約相關參數、不受利率影響的違約參數以及信用違約票券價值之間的關係。

We derive a closed-form pricing formula for credit linked notes using reduce-form model. These notes are very popular in European and have been planned to be issued by Taiwan local security firms. These hedge instruments are fixed income security with an embedded credit default swap and can provide the hedge to issuers by the forgiving reference obligation and the issuer has no risk of nondelivery on the hedge. We also use numerical analyses to show that relationship between the volatility of the interest rate, default correlation parameter with interest rate, default intensity that is independent of risk-less spot interest rate and the valuation of credit linked note.