The Valuation and Hedging Strategies of High Yield Notes

Abstract

本文導出台灣證券商將於2003年發行的高收益票券訂價公式的封閉解。這種金融衍生商品是零息債券加上一個短部位的股票賣權，其為證券商在面臨法律限制發行股票賣權或股市不景氣時的避險工具。本文證明高收益票券可以買入零息債券及賣出匯率連結股票賣權來複製，並且探討這些票券的特性及避險策略。最後，本文導出高收益票券在HJM架構之隨機利率下的訂價公式。 We derive a closed-form pricing formula for high yield notes that have been planned to be issued by Taiwanese local security firms in 2003. These financial derivatives are pure discount bonds with an embedded short position in equity put options. They are useful hedging instruments in financial markets with a legal restriction on issuing put options on equities or under bear market conditions. We show that high yield notes can be synthesized by buying pure discount bonds and selling exchange-linked put options, and investigate their specific properties and the corresponding hedging strategy for issuing high yield notes. Finally, we derive the closed-form pricing formula and hedging strategy for high yield notes under the Gaussian HJM framework of stochastic interest rates.