A Study on the Value and Risk Assessment of Swat Options in the Real Estate Market
In this paper, drives a pricing formula for a default swap option (DSO) that an investment bank in japanproduced on the credit-risk of a convertible bond (CB) issued by a third company C. In this DSO contract,a protection buyer A not only obtains a full hedge for the principal of the CB against a de...
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| Published in | 대한부동산학회지, 34(2) pp. 463 - 477 |
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| Main Author | |
| Format | Journal Article |
| Language | English |
| Published |
대한부동산학회
01.12.2016
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| Subjects | |
| Online Access | Get full text |
| ISSN | 1225-1054 2713-6981 |
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| Summary: | In this paper, drives a pricing formula for a default swap option (DSO) that an investment bank in japanproduced on the credit-risk of a convertible bond (CB) issued by a third company C. In this DSO contract,a protection buyer A not only obtains a full hedge for the principal of the CB against a default of C butalso owns the option of starting an interest swap between the buyer and a protection seller B when a creditevent happens. This option gives A an opportunity to recover the interests from the CB as well. When Astarts the swap after a default, the floating rate is associated with the protection premium. After a certainsimplification, this paper makes a no-arbitrage valuation for the premium in a discrete time approach. Inaddition, when the credit quality of the parties A and B is taken into account in the valuation, a fair valueof the default swap option is also derived. KCI Citation Count: 1 |
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| Bibliography: | G704-SER000009102.2016.34.2.022 |
| ISSN: | 1225-1054 2713-6981 |