Research On The Pricing And Risk Hedging Of Exotic Option Embedded In Structured Products

Structure product is a kind of embedded option, which combines property of high leverage of option, and commitment of ensuring capital. Plainly speak-ing, it puts the high risk of option under some control, such that it provides a relatively safe method for common investors to handle option trade.The flexibility of option ensures the diversification of structure product. Also, there arc several of structure products of embedded option. Although most products in the market claims that they can ensure capital and revenue, a majority of them refuse to be redeemed previously, with a bad mobility, which leads to the situation that, once research team of the publisher make mistake in strategy, products could make no profit. Specially, the stock market unilateral tumbles on the end of 2007 and the first half of year 2008, causing huge risk in the market.Firstly, This paper explains, from the view of publisher, how these parameters of structure product impact the revenue, then analyzes and evaluates these products. Secondly, it solves and analyzes Greek alphabets in the exotic options of structure product, providing evidence for publishers to control risk.To handle these problems, this paper applies BS analytic solution, MC simulation combined with finite variation, to obtain intrinsic value, and fur-thermore, compare it with the issuing price to give advice for the investors in the sense of pricing structure products. However, the comparison between value of structure product and issuing price only serves as a reference for the rcasonability of prospective earnings. The judgement for the price of pruduct should base on investors’ prediction of the trend of underlying price.In the view of publishers, this paper explains how the several parameters of s.p. impact on the income, evaluates and analyzes the product. Then it solves and analyzes the Greek alphebctics, i.c. riskc elements, of embedded exotic option, and offers evidence for publisers to control risk, pointing out noticeable questions for publishers.On Fcb 9th,2015, SSE 50 option products hit the market, making prospcc- tivc breakthrough for the structure product connected with SSE 50, and futures presumed to release to market on April 16th would provide solid protection for such products.