An Empirical Analysis Of The Mechanism Affecting The Premium Rate Of Structured Notes

Structured notes were born in the late 80 s of the 20 th century,which is an innovative financial instrument that combines fixed income products and derivative financial products.The product has the characteristics of high yield and rich variety,and is an important part of China’s financial market.The conclusions of foreign pricing studies on structured notes are basically the same.Unlike Europe and the United States,China’s financial market is relatively backward in development,and the launch of financial wealth management products is relatively slow.This shows that foreign research results are not necessarily applicable to China.Through the combing of relevant literature in China,it is found that the pricing conclusions of Chinese scholars on structured notes are not consistent.By combing through the literature,it is found that the reasons for the inconsistent conclusions reached in this paper may be related to the issuance of the Guiding Opinions.Therefore,this paper will conduct research on its pricing from this perspective and explore the influencing factors of its pricing.This article selects a sample of structured bills from domestic banks,and from the perspective of asset management business norms in financial institutions,Monte Carlo simulation will be used to value their embedded options.When calculating its theoretical value,it is assumed that its price path is random Geometric Brownian motion,and then in terms of estimation parameters,the product’s one-year Risk-free rate treasury bond in the same period are used to estimate the drift rate,and its variance is estimated using the historical data of its underlying assets such as CSI 300 Index,Shanghai Stock Exchange 50,and China Securities Exchange 500 in the same period.Then use the MME method to estimate the degree of freedom,simulate its price path through Monte Carlo simulation,and calculate its theoretical value according to its product specification.The products selected in this article are all wealth management products of typical large banks,and their linked targets are common options.After calculating the theoretical value of the sample,the premium rate is calculated based on its theoretical value and actual value.By combining relevant literature research and analyzing the influencing factors of its premium rate,multiple regression analysis is used to study the relationship between its premium rate and influencing factors.Finally,three conclusions were drawn.1 、 After the introduction of asset management business standards for financial institutions,structured notes tend to be issued at a discount.2、 The premium rate of structured notes is negatively correlated with the complexity of the embedded option structure of the product.3、The premium rate of structured notes is negatively correlated with the investment term of the product.