A Study On The Design Of Strutured Products Of Commercial Banks

Since China Everbright Bank initial introduced structured products of foreign currency in China in Sep.2005, more and more commercial banks had offered structured products. Structured products began to attract investors'attentions. They entered into a rapid development stage with the emergence of RMB structured products in 2005.Structured products consist of fixed-income securities and derivative contracts, which gains more profits for investors on the premise of high principal protect.However, when China's financial market developed rapidly and investors had great enthusiasm for structured products, proceeds crisis broke out in the structured products market. One of Shanghai Pudong development bank's products, kicked off "zero-income" storm of structured products. Then the development of structured products fell to a bottom. This largely due to Chinese banks'lack of design experience, inaccurately judging market trends, weak pricing and risk hedging power as well as imperfect financial derivatives market in China.This paper provided a thorough and profound analysis of structured products' structures, types and risk return characteristics, described the design process of structured products and price tactic and take Asian stork options linked product for an instance, discusses the pricing process of structured products. Finally, the author put forward some proposals in order to improve the commercial banks'design ability, including diversity of products types and terms, enhancing the ability of banks'pricing and risk control, improving the financial market, and training professionals.There are few of studies on structured products in the view of design. Most people focus on pricing of special products and policy suggestions of improving structured products market. This paper devoted to reveal the mystery veil of structured product through profound analysis from a design point of view, using Monte Carlo simulation to simulate the product pricing process.