Abstract
In this research, we analyze the role of credit risk in the structured product markets, represented by Korean Equity Linked Securities (ELS). We find empirical evidences that the credit risk of the issuer is incorporated in the returns of the ELS. ELS that is issued by higher credit risk issuer provides higher ELS coupon rates to compensate the investors for extra credit riskiness. Especially, our research exploits the new method to capture the returns of the ELS without using any price dynamic model assumption that causes potential mispricing or bias results.
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