Study On The Pricing Of The Stock Linked Structured Products

In2013, due to the dismal stock market, many hedge funds take the bank financial products as a safe haven which made the issue size of financial products straight up. Meanwhile, banks constantly enrich the product line which give investors more choices. With the continuous development of financial markets and the promoting of market-oriented interest rates in recent years, the rapid development of financial products will also be facing a transition test. Banks should make initiatives on the underlying assets and their revenue structure design. In the future, structured financial products will be one of the main financial products.Structured products are designed using combination technique of financial engineering, and through the decomposition of this product we can get the basic elements pricing needs. That is, we use the combination technique to create structured products and use the decomposition technique for product pricing. Based on this principle, this paper will take three popular products embedded binary to study its pricing method. Through the interval cumulative gain financial products which is linked the The Hang Seng Chinese Enterprises index issued by HSBC, we want to explain how to price one-object product. As the research on single-object option is more mature, we can refer to the results of previous studies or improved results to get relatively accurate analytical solution. Then we will take the "golden sunflower" focus linkage series which lind selected bank stocks issued by China Merchants Bank as an example, to explain how to price multiple-objects structured products. If there is mature research results we can refer to, we can take it as the pricing model. But we more employ approximate methods, such as Monte Carlo simulation method to price the option because of its complexity. Finally, we choose a series of structured products which are different only on the initial investment and expected gain. We want to explain how to make a better choice among such products. So, although the pricing of structured financial product often use the corresponding model to get its intrinsic value, the judgment of structured product’s value should be based on the judgments of the underlying stock price trend. The initial value we have got is only a reference as to whether the expected return rate is reasonable. After all, the investment value of structured products is to reduce the risk of the underlying stock investment.