Pricing And Risks Analysis Of Structured Deposits

In October,2019 China Banking Regulatory Commission(CBRC)issued the Notice on Further Regulating the Structured Deposit Business of Commercial Banks(Notice),which symbolized the specialized supervision of structured deposits was enforced.Before that,there was ambiguous boundaries between structured deposits and money management.In detail,structured deposits products seem to evil and good mixtures and have mixed regulations with money management,bringing misunderstandings to the investors.What's more,influenced by the pandemics recently,structured deposits products with the feature of attaining high profits and being breakeven were attractive to investors.However,structured deposits products have so complicated and various structures,thus it was difficult for investors to make reasonable decisions.As for the conditions above,this paper will explain ins and outs of structured deposits through comparison with money management in the empirical analysis.Thus,investors will further understand the pricing and risks of structured deposits and the similarities and differences between structured deposits and money management.And this paper will research on structured deposits through macro and micro perspectives.On the macro level,this paper first elaborates on the definition and development of structured deposits,and then analyzes the current situation of structured deposits and the changes in supervision over the years.On the microscopic level,this paper selects one of China Merchants Bank's structured deposits linked to Shanghai and Shenzhen 300 and one for financial management to make a comparative analysis of pricing and risks.As for pricing,the fixed-income part adopts cash flow discount calculations.And the options part assumes that SCI 300 Index follows geometric Brownian motion,uses the Monte Carlo method to simulate the price path and calculates the expected return and discounts.As for risks,firstly conduct a general analysis of the market risk of structured deposits,and then a sensitivity analysis of the structured deposits will be conducted.Through comparison with structured financial management,it is found that this structured deposit has lower risk and is more suitable for prudent investors,and it is concluded that when the risk-free interest rate is low and more actual deposit days on the first observation day,investors can obtain a larger return.At last,a summary of structured deposits and suggestions for its improvement will be given.