||This article study two structured notes, respectively, a premium guaranteed currency-linked note and multi-asset-equity-linked note. Via Monte Carlo method, simulate the pricing and analysis the sensitivities of the products. Help the investors to realize the components of structured notes and to make a better decision. |
The first product: premium guaranteed currency-linked note was launched in 2011. The research via Monte Carlo method simulation found that the issuer would gain merely 3 percent profits. However, on the investors stand, this is fair contract. On the other hand, the investor should has his or her own point of view with the future exchange rate between deposit currency and alternate currency and think about how to make good use of holding currency once the home currency converted to linked currency.
The second product: ten-year multi-asset-equity-linked note was launched in 2007. The research via Monte Carlo method simulation found that as followings:
1. The correlation between linked equities is low.
2. The product pricing is too high.
3. The issuer would gain 19.79 percent fee.
After half year of the issue date, it happened financial crisis and the whole world stock market was weak. Afterwards, one half of the linked equities’ prices fell because of major crisis: taken over and broken. The fore mentioned were against investor’s situation. According to the actual data, the product is still alive if the investors enter this contract.
This article would provide the references to help the investors to realized the core meaning of the products which promoted by the financial institutions
key word: Structure note、Monte Carlo simulation
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