Research On Accumulator

In 2008, a structure product called accumulator aroused a storm of law suits in Hong Kong and some other Asian cities. It is reported that many celebrities and public companies were involved in them, including country garden’s largest shareholder Huiyan Yang and the chairman of modern beauty salon Yu Zeng. Two of the most famous companies which were involved in the case were CITIC Pacific and Shenzhen Nanshan Power. In October 20th, it was reported that total loss of CITIC Pacific would be 15.5 billion HKD because of accumulator and the chairman of the company would left the company. Shenzhen Nanshan Power signed a contract with Goldman and the contract brought large loss to Shenzhen Nanshan Power. Because the risk of the product, the medium in Hong Kong has renamed the accumulator "I will kill you later". Despite its popularity, the risk and structure of the product is not well known especially. My study uses CITIC Pacific and Shenzhen Nanshan Power as examples and attempts to characterize and understand the properties of this new and fairly unknown derivative investment.In chapter three, my study focuses on the example of CITIC Pacific. Firstly, the paper explicitly analyses the rules of accumulator and concludes that the contract is unfair and more beneficial to investment bank. Secondly, through Monte Carlo simulation this paper studies the profit and loss of accumulator contracts. The result tells us that the probability that accumulator brought loss to CITIC Pacific is much bigger. Lastly, this paper gives the price of accumulator contract by Monte Carlo simulation and the price is negative. So, signing the accumulator is not a wise choice.In chapter four, my study focuses on the example of Shenzhen Nanshan Power. This company signed two contracts with Goldman and there were some differences between the contracts. The methods used to study them were similar with the methods before. Through the study, the paper gives a result that the first accumulator is more beneficial to Shenzhen Nanshan Power and the loss is because of financial storm. The second accumulator is much more beneficial to Goldman and Shenzhen Nanshan Power would probably to loss much money in future after it signed the contract.Chapter five makes a conclusion and gives the suggestions to investors and supervision organization.