Research On Return Of Gold-Linked Structured Deposit In China

In a favorable policy environment, gold-linked structured deposit has been developing rapidly in China with strong investment demand and adequate power of supply since 2005. Currently, the most portion of products are medium-term deposits embedded exotic options, priced in USD, AUD and CNY and issued by state-owned commercial banks. However, the wide ranges of structured products are so complex that make investors without financial knowledge hard to make decisions. In this paper, the comprehensive comparative analysis of premium rate and expected return will be made first to choose a more suitable indicators for investors. And then the expected yield of the gold-linked structured deposits will be calculated by Monte Carlo Simulation Techniques to make sure if they are profitable. What's more, systematic analysis of other affecting factors will be made, trying to assess the gold-linked structured deposits in China and offer some sensible financial advice for investors.Through qualitative and quantitative research, the main conclusions are as following: I. Without considering the redemption, the expected return of gold-linked structured deposit calculated by using Monte Carlo simulation is similar to the actual yield. II. Compared with the bank deposits, the return of gold-linked structured deposits is higher. The return of the gold-linked structured deposit invested in USD is higher than the stock index, while the return of the products invested in other currencies was significantly higher than the stock. III. Considering other affecting factors, the credit rating of banks and the lowest yield affect the return on investment of gold-linked structured deposit, to a certain extent; the type of the embedded options and trends and fluctuations in gold prices combined to affect the investment income of deposit product. Specifically, the excess returns of three kinds'products were significantly positive, that is, the gold-linked structured deposit issued by state-controlled banks, invested in AUD, and those products without a coupon, which means the investment returns of these deposit are better than other types of products. In addition, there is a significant difference between investment in gold directly and investment in gold-linked structured deposit.