KIS 채권평가 - Beyond Pricing
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Introduction
Introduction
- KIS Pricing
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Asset Pricing
Asset Pricing
- Bond Pricing
- Alternative Product Pricing
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Fund Evaluation
Fund Evaluation
- Bond Index
- ETF
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Solution
Solution
- Solution Service
- Consulting Service
- Contents Service
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Beyond Pricing
Beyond Pricing
- KIS-Net
- Data Providing
Asset Pricing
OPTION
OPTION
- Bond with option is where specific rights are given to the issuer, bond holders or both
- Callable bond : A callable bond is a bond that can be redeemed by the issuer prior to its maturity.
- A put bond is a bond that allows the bondholder to force the issuer to repurchase the security at specified dates before maturity.
- There are bonds with both call and put options.
- Normally, bonds with options use the abbreviation NC to express its structure
ex) 15NC1: Maturities 15 Years, Non-Callable bonds, which can not excise the call rights on the first year
Callable Bonds
Concept
A callable bond is a bond that can be redeemed by the issuer prior to its maturity.
Special Features
- A callable bond pays an investor a higher yield than a Option free Bond
- Effective duration is reduced
- Callable Bond Value = Option free Bond Value – Call option value
- Interest Fall (Price Increase) → option exercised : Limit on Bond Price beyond exercise price → Disadvantage to investor
Yield and Price
Putable Bonds
Concept
A put bond is a bond that allows the bondholder to force the issuer to repurchase the security at specified dates before maturity.
Special Features
- A putable bond pays an investor a lower yield than a Option free Bond
- Effective duration is reduced
- Putable bond value = Option free Bond Value + Put Option Value
Yield and Price
Pricing Method
Since fixed rate bond with option are in backwardation, Black-Derman-Toy(BDT) binominal trees model is used
Create Binominal Interest Rate Tree that fits Spot Curves
Calculation
Using the Interest rate Tree calculated using the BDT Model, we calculate the value of the bonds with options until the present, based on the call or put characteristics of each node.
