The purpose of this study is to find the price of structured notes-Dual Indexed FRN especially through no-arbitrage model : the Hull-White model. This study estimates the parameters of one-factor Vasicek model and 2-factor Hull and White model using GMM. And, It was found that Hull and White model is superior price of Dual Indexed FRN in our sample periods to equilibrium model. And the result shows that 1-factor and 2-factor model have little difference in results. But, in terms of logical viewpotint, H-W 2-factor model is superior to 1-factor model.
Generally, in this paper, it can be said that Dual Indexed FRNs are a little more expensive than market price. But, it may be not overpriced to issuer of Dual Indexed FRN because it is not easy to hedge these FRN and it needs more effort and cost to hedge the bond. Therefore it can be said that there are not significant proof that Dual Indexed FRNs are overpriced.
