The analysis of attractive rates offered under Dual Structured Notes without principal protection, regarding the probability to occur and the operation at market prices of the implicit options
(2014) NEKN02 20141Department of Economics
- Abstract
- This paper has the purpose to determine whether the attractive rates offered by a local Investment Bank in Mexico under structured products, more specifically under structured notes without principal protection denominated “Dual Structured Notes”, are plausible to get, showing whether the strikes of the implicit options were chosen within critical price values for the foreign exchange rate MXN/USD and as consequence whether the options implicit in the notes were operated at market prices.
In order to make an analysis of the Dual short-term structured notes, we are going to focus in the option implicit in the notes and the underlying asset. Firstly, we are going to calculate the critical exchange rate prices in the left and right tail of... (More) - This paper has the purpose to determine whether the attractive rates offered by a local Investment Bank in Mexico under structured products, more specifically under structured notes without principal protection denominated “Dual Structured Notes”, are plausible to get, showing whether the strikes of the implicit options were chosen within critical price values for the foreign exchange rate MXN/USD and as consequence whether the options implicit in the notes were operated at market prices.
In order to make an analysis of the Dual short-term structured notes, we are going to focus in the option implicit in the notes and the underlying asset. Firstly, we are going to calculate the critical exchange rate prices in the left and right tail of the term ahead MXN/USD exchange rate stochastic variable distribution. Secondly, we are going to compute the options price at the original strike and at those critical values, in order to compare it and determine whether those instruments were sold at market prices within the range. Thirdly, we are going to estimate the analytical value-at-risk (VaR) as a tool for the investors to know the risk of this kind of products.
As a result of this work, such actors as pushers, advisors and managers that encourage investors to take structured notes without any reference to their risk profile, will be able to provide a guidance for investment decisions in order to assess investors the risks of these notes based on critical prices for the exchange rate and VaR information.
Additionally, these patterns have the potential to provide a technical background for the Mexican and International Regulators to incorporate the minimum requirements and rules that financial companies should implement in order to issue and allocate structured notes without any principal protection to their customers. These results give also a possibility to develop the base for the inference if the implicit options or other financial products, that are sold or bought to partners of the same Financial Group, are operated at market prices. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/4468781
- author
- Benitez Sanchez, Helen Patricia LU and Brodskiy, Grigory LU
- supervisor
- organization
- alternative title
- Dual Structure Notes without principal protection
- course
- NEKN02 20141
- year
- 2014
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Structure Notes, VaR of options, Market prices, Critical Values for foreign exchange rates, Critical prices
- language
- English
- id
- 4468781
- date added to LUP
- 2014-06-18 09:20:03
- date last changed
- 2014-06-18 09:20:03
@misc{4468781,
abstract = {{This paper has the purpose to determine whether the attractive rates offered by a local Investment Bank in Mexico under structured products, more specifically under structured notes without principal protection denominated “Dual Structured Notes”, are plausible to get, showing whether the strikes of the implicit options were chosen within critical price values for the foreign exchange rate MXN/USD and as consequence whether the options implicit in the notes were operated at market prices.
In order to make an analysis of the Dual short-term structured notes, we are going to focus in the option implicit in the notes and the underlying asset. Firstly, we are going to calculate the critical exchange rate prices in the left and right tail of the term ahead MXN/USD exchange rate stochastic variable distribution. Secondly, we are going to compute the options price at the original strike and at those critical values, in order to compare it and determine whether those instruments were sold at market prices within the range. Thirdly, we are going to estimate the analytical value-at-risk (VaR) as a tool for the investors to know the risk of this kind of products.
As a result of this work, such actors as pushers, advisors and managers that encourage investors to take structured notes without any reference to their risk profile, will be able to provide a guidance for investment decisions in order to assess investors the risks of these notes based on critical prices for the exchange rate and VaR information.
Additionally, these patterns have the potential to provide a technical background for the Mexican and International Regulators to incorporate the minimum requirements and rules that financial companies should implement in order to issue and allocate structured notes without any principal protection to their customers. These results give also a possibility to develop the base for the inference if the implicit options or other financial products, that are sold or bought to partners of the same Financial Group, are operated at market prices.}},
author = {{Benitez Sanchez, Helen Patricia and Brodskiy, Grigory}},
language = {{eng}},
note = {{Student Paper}},
title = {{The analysis of attractive rates offered under Dual Structured Notes without principal protection, regarding the probability to occur and the operation at market prices of the implicit options}},
year = {{2014}},
}