The Design And Analysis Of Structured Debt Product Linked To A Basket Of Stocks

Structured debt product linked to a basket of stocks refer to those product whoseexpected return and risk are correlated to the basket stock performance, the opportunity toobtain potentially higher returns are related to stock basket daily or final performance.Structured financial products, particularly linked to the stock basket structured debt products，emerging in the domestic financial market is popular in the market, but the development offinancial products in our market is still lagging behind. On one hand, due to policy limit，although stocks market trading actively and variety of products existed, the development offinancial products is still subject to many restrictions; On the other hand, many financialproducts linked to many investment targets and has complex structure, financial engineeringtechnology has an irreplaceable role in product pricing. With the opening up of China’sinterest rate market and derivatives market, expansion of stock structured financial productswill be the trend; therefore understanding of evaluation, design and risk management of thiscommodity becomes increasingly important in the future.This article will take the analysis of stock basket structured debt products from threeaspects which include product evaluation, product design and risk management. First of all，take “huiju zhonghua” for example, based on introduction of equity structured products andfinancial pricing theory, this paper proposed the evaluation of stock basket structured debtproducts including pricing, Monte Carlo simulation and sensitivity analysis. Second, designsense is study power; design principle is theoretical basis; design process is guidance; designprocess is running protection, on the basis of the proposed design sense, principles, methods,and processes, this paper try to put forward two products including one bullish stock basketpreservation product and one bearish high-dividend non-preservation products. Finally,market risk management is to identify measure, monitor and control the whole process ofmarket risk. Actually risk management refers to risk identification, followed by accuratemeasure of risk, risk aversion and control process.On one hand, this research could provide a reasonable evaluation and design, as well asthe issuance of structured products may face the risks and possible hedge; On the other hand，the investor can learn more about the rewards and risks of the investment-related goods.