Earnings Risk Of Commercial Bank Financial Products Research

Over the past 4 years, bank financial products of China have achieved substantial development, and have stood among the most important investment vehicles and ways of financial management. During the rapid development, however, many problems are exposed. The original intention of this paper is to help the investors have a better understanding of the financial products market and to help the commercial banks provide better financial management service.Return and risk is the core of an investment, and the valuation of return and risk of it is done in comparison of other investments. What are the advantages and disadvantages of the risk and return of bank financial products relative to other investment vehicles, especially other ways of deputy financial management? This paper tries to answer this question by an empirical research comparing the risk and return of the bank financial products and other investments with two samples of fixed-income products and A-share linked structured products.Chapter 1, the Introduction, introduces the research background and significance of this paper and the basics and development of bank financial products. Chapter 2 summarizes the researches of the literature from the perspectives of the pricing of structured products, empirical research on the return distribution and normative research on product design and choice. Generally speaking, the available researches conclude that with the development of the market, the designs of structured products become increasingly complex because of banks' effort to maintain market position and monopoly profit, and as a result, the issuers gain from issuance and trading at a premium, while the investment value of products deceases.Chapter 3 concludes the basic features of the fixed-income products by analyzing the examples, and based on the features, forms the study samples of the fixed-income products. The comparison of realized return and expected return finds that most products realized expected return, and that the return of most products exceeded the corresponding saving rate. The hypotheses on the factors influencing fixed-income products returns are suggested on account of credit risk, liquidity risk, and so on, and are tested with regression analysis. We find that the realized returns are correlated with investment, issuer's size, and other factors, and that the relative returns compared with fixed-income common funds is closed related with the term of the products: the performance relative to the money market funds rise with the term, while the performance relative to the bond funds decrease with the term.Chapter 4 studies the A-share linked structured products. We first put forward the design of a simple synthetic A-share linked product, and price the product with the non-arbitrage method of financial engineering. Then we select 10 A-share linked structured products available on the market and conduct performance comparison by back testing, and find that the available products at a disadvantage with other investments in terms of risk and return, while the synthetic product boasts its unique risk-return character and comparative advantages relative to other ways of financial management, thus a great potential market.Chapter 5 concludes the paper, and pointed out that the empirical results of this paper suggested that the different competition of different financial markets leads to the distinction of the product risk and return.This for the first time conducts a comprehensive empirical research on the RMB fixed-income bank financial products, a historical simulation research on the A-share linked structured products, a comparative research on the bank financial products with comparable investments and deputy financial management products.