KIS 자산평가 - Beyond Pricing
-
Introduction
Introduction
- KIS Pricing
-
Asset Pricing
Asset Pricing
- Bond Pricing
- Alternative Product Pricing
-
Fund Evaluation
Fund Evaluation
- Bond Index
- ETF
-
Solution
Solution
- Solution Service
- Consulting Service
- Contents Service
-
Beyond Pricing
Beyond Pricing
- KIS-Net
- Data Providing
Asset Pricing
CDS/CLN
Credit Derivatives
- A credit derivative product is a derivative product that separates credit risk from underlying assets
- Guarantor Buyer transfer credit risk and pays fee, Guarantee seller receives credit risk and fee
Function
By diversifying concentrated credit risk to various economic entities, stabilization of the financial system can be achieved
Issuers point of view
- Increase the efficiency of credit risk management: transfer credit risk through guarantee purchase, reduce credit risk exposure
- Maintain relationships with clients: No need to sell assets
- Revenue creation through various product design and investment: CLN, synthetic CDO, Forward Starting CDS and etc.
Market efficient point of view
Increase liquidity of reference assets: Credit derivative transactions may occur more than transactions for physical(real) assets (loans, bonds)
Investors’ point of view
Various maturity and yield composite product can be design to meet risk-return structures of investors
Risk
- Concentration of credit risk by excessive guarantee position - collapse of Hedge fund and investment bank
- Complex product design makes it difficult to identify overall risk - difficult to calculate market prices for structured products
Credit Derivatives Types
| Type | Description |
|---|---|
| CDS (Credit Default Swap) | A contract that Guarantor Buyer transfer credit risk and pays fee, Guarantee seller receives credit risk and fee |
| Basket CDS | A contract that Guarantor Buyer transfer credit risk of a particular trench and pays fee, Guarantee seller receives credit risk of a particular trench and fee |
| Credit Spread Option | CDS Spread based underlying option contract |
| Forward Starting CDS | CDS Spread based underlying forward contract |
| CLN (Credit Linked Note) | Bonds with CDS |
| Synthetic CDO | instead of transferring underlying assets, a product that has structure of CDO by synthetic CDS |
| CDS Index | Credit Index to tract down CDS Spread |
| Leverage Skew Swap | Products traded basis of the differences between Index Spread and Intrinsic Spread |
| TRS | Trade that exchange Total return of Bonds and base set rate + exchange of spread |
| (R) MBS | Securitized mortgage-backed loans |
| CMBS | Securitized commercial mortgage-backed loans |
| CLO | Securitized Leveraged Loan (Junk Rating Loan) |
Credit Derivatives Pricing Model
| Type | Descriptio |
|---|---|
| Single CDS | Reduced Form Model (Hazard Rate Model) |
| Basket CDS | 1-factor Gaussian Copular model |
| CDO | LHP Model |
Credit DLS/CLN = BOND + CDS
CDS-CDS BTB Trade, ABCP/ABS Issuance
