This paper analyzes and values dual directional structured products (DDSPs) issued by several major banks since January 2011. The authors find that DDSPs can be valued using an option decomposition approach similar to those used with other structured products. They confirm their analytic results using Monte Carlo simulation and use both techniques to [...]
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Posted on May 15th, 2012
Posted on May 10th, 2012
Day-count conventions are a ubiquitous but often overlooked aspect of interest-bearing investments. While many market traded securities have adopted fixed or standard conventions, over-the-counter agreements such as interest rate swaps can and do use a wide variety of conventions, and many investors may not be aware of the effects of this choice on [...] Posted on April 22nd, 2012
Variable annuities have been sold in the United States for sixty years. A new type of variable annuity has been introduced recently based on structured product-like investments instead of the mutual fund-like investments found in traditional variable annuities. While structured products are popular in the over-the-counter derivatives market, embedding a structured product into [...] Posted on April 18th, 2012
This paper addresses a situation wherein a retail investor must liquidate positions in her portfolio — consisting of assets and European options on those assets — to meet a margin call and wishes to do so with the least disruption to her portfolio. The authors address the problem by first generalizing the usual [...] Posted on February 8th, 2012
Prior research on structured products has demonstrated that equity-linked notes sold to retail investors in initial public offerings are typically issued at above their fair market value. A particular type of equity-linked note – reverse convertibles – embed down-and-in put options and offer investors relatively high coupon payments in exchange for bearing some [...] 2 pages
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