Hong Kong Market Structured Products Pricing Research

Financial structured products market is an important component of international financial markets.In recent years,the turnover of futures and options increased significantly in Hong Kong.In 2007 FIBV Annual Report pointed out that the turnover of Hong Kong derivative warrants reached to 610.8 billions which occupied the first of the world derivative market.Derivative product pricing is the most important and difficult problem in derivatives research.And structured products pricing has a very important significance for both invertors and issuers.Firstly in this paperâ… analyze compositions and design features of structured products constitute the foundation of structured product pricing.Then,based on the non-arbitrage balanced principle of financial engineer,the valuation method,factors affecting pricing,pricing models and technologies of structured products are studied respectively.Pricing methods of the Specified structured product are the difficult and the key point.International studies on structured products focus on the individual product pricing methods.Therefore,three major structured products in Hong Kong derivative market,structured notes,CBBC and Derivative warrants are studied as examples in this paper.Based on modern option pricing theories,Black-Scholes and Merton option pricing model are used to study the pricing of the structured products,and its design,characteristics and risk are studied respectively.Based on Black-Scholes and Merton option pricing models,I also use the checking method to estimate the parameters of the model following real prices data,And calculate the theoretical price.Then,I compare the real and theoretical prices of the two pricing models.The results show that the effects of the Merton option pricing model are superior to the Black-Scholes option pricing model.Moreover,It shows that Hong Kong stock prices are also affected by the instant messages,and the jump phenomenon may exist in Hong Kong stock market.