The Research Of Designing Exchange Rate -linked Structured Financial Products

Exchange rate-linked structured financial products is one of the structured deposits, which consist of a fixed income security contract and a derivative contract. The amount of risk of the product is between that of a pure fixed income security and a pure derivative.The foreign exchange reserves in China have two very significant features. First, the scale of the reserves is huge, which is about 3.33 trillion US dollars, ranking first worldwide. The second is that the reserves is highly centralized, mainly in the hands of the government. Centralization is helpful for the government to maintain an independent monetary policy, while we must see that faced with this huge amount of reserves, the government can’t allocate them very well for a little portion of them could influence the whole market. On the other hand, "hiding reserves in people’s pocket" is a good way to diversify investments where people’s wisdom could be fully used of. In the background of "hiding reserves in people’s pocket", the market of reserve investment has a broad prospects. With respect to the relatively high rate of return in the domestic fixed-income securities market, rate of return in western countries seems less attractive for domestic investors. This opportunity creates a huge demand for the structured foreign exchange financing products, which domestic financial institutions should actively seize to carry out business of exchange rate-linked structured financial products.Based on the study of the domestic and foreign products, this paper focus the study on the design of the exchange rate-linked structured products, mainly consists of product demand analysis, product pricing method. And at last the author would analyze profit and risk from both investors and issuers.