The Structured Financial Products Pricing Of Commercial Bank In China

With the rapid development of China’s economy and financial markets, as well as increased demand for residential investment, financial derivatives have developed rapidly, the number of financial products also rise sharply. Various types of financial products not only enrich the financial markets, but also bring a lot of uncertain risk to financial market. How to design and pricing financial products reasonably have became public issue of common concern.Structured financial products is a new type of financial product combined with the zero-coupon bonds and derivatives, taking into account the characteristics of the fixed deposit of securities and options, so that investors seek higher returns while reducing the potential risks. Therefore, the rapid development of structured financial products has become indispensable financial products in the domestic banks in China.The first part is an introduction. Firstly review the history of the development of domestic and foreign structured financial products, summarize the pricing methods and research progress of the products and point out that innovation of this study and the shortcomings.The second part is to introduce structured financial products. Firstly introduced the definition of structured financial products and summarize its classification in detail, describes the basic status of China’s financial markets and structured financial products.The third section describes the pricing principles and methods of structured financial products. Sum up the option pricing theory and methods, and improve the problem of Volatility clustering exists in the model.The fourth part is empirical analysis section. Select three representative structured financial products, according to the number of underlying assets divided into single and multi-asset type, and then select a different model for the pricing if there is volatility clustering effect and time-varying effect. In addition, use the Cholesky decomposition to release the correlation between underlying assets of the linked multi-asset financial products. Use Monte Carlo simulation method to price the three different types of financial products, and verification and evaluation of results based on real data and actual earnings.The last part is the conclusion and recommendations. According to the empirical results, summarized the problems exist in China’s commercial banks and financial products and propose appropriate recommendations for improvement.