第四章金融风险管理的主要工具—金融衍生品与定价.ppt

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * We see that the equity is like a call option on the firm value.The payoff at maturity of the equity is:Equity Payoff = Max(VT-K,0)The zero-coupon corporate bond is like a normal (riskfree) bond with an embedded written put with strike K.Debt Payoff = K - Max(K-VT,0) Question: Should corporate bonds have higher yields than Treasury bonds? (Note the difference between promised yield and realized yield.) Should the expected (realized) yield be higher than those of Treasury bonds? Subordinated Debt Suppose the firm now has three classes of securities:Senior Debt with a face value of K1 (10 million).Junior Debt with a face value of K2 (5 million).Equity. The payoffs of the three securities at maturity, as a function of the firm value, are: The senior debt value is the same as before: Senior Debt Payoff = K1 - Max(K1-VT,0) Equity is still a call, but it now has a higher strike price,K1+ K2: Equity = Max(VT-K1-K2,0) The junior debt is more complicated: When V is near K1 it looks like equity. When V is near K1+K2 it looks like senior debt: Junior Debt = VT - K1 + Max(K1-VT,0) - Max(VT-K1-K2,0) = Max(VT-K1,0) - Max(VT-K1-K2,0) (like a Bull Spread) Merton’s Model Merton’s model regards the equity as an option on the assets of the firm In a simple situation the equity value is: max(VT -K, 0) where VT is the value of the firm and K is the debt repayment required Equity vs Assets Volatilities(on the pricing of corporate debt, Merton) *What is the risk neutral probability of default? The risk neutral probability of default is given by the probability that the stock call option ends out-the-money. That is equivalent to the probability that V1-year10 million. In the case of Merton’s model, this probability is equal to N(-d2), where d2