Pricing And Risk Analysis Of Structured Financial Products

In recent years,the continuous development of Chinese economy has led to the continuous improvement of people’s wealth level and the increasing enthusiasm for financial management.According to the data of Hurun Research Institute,Chinese private wealth market has reached a scale of 100 trillion RMB.However,at present,due to the lack of professional financial literacy of ordinary investors,direct investment in the capital market or the real estate market is very risky,and the benefits are hard to be guaranteed.At the same time,due to the continuous decline of the market interest rate,the traditional deposit and loan business has been unable to meet the development needs,and commercial banks have shifted the direction of business expansion to personal finance business.As a new type of financial management tool,structured financial management has the characteristics of controllable risks and considerable returns,and it is deeply loved by investors.Therefore,in recent years,Chinese commercial banks have strengthened their research and development efforts in structural financial services and made a lot of innovations to meet the diversified needs of investors.As the release of "new rules","financial management rules",and other policies,the development of financial institutions in the asset management business in China has entered a new situation,which shows that information agencies rating fund has been canceled,the breakage of the commercial bank to honour rigidity.Thus,meeting regulatory compliance requirements of structured finance has become the focus of the public,of course,how to design and structured financial products pricing so as to meet the demand of regulation and investors has become the hot issues to be solved now.In view of this,this article selects the pricing and risk analysis problem of“Agricultural Bank of China Private Bank · Ruyi" CSI 300 index structured financial products that is issued by the Agricultural Bank of China as the research content,and pricing in the complete theory of the actual product,and satisfy the commercial banks and non-professional investors value analysis for this type of structured finance products and risk analysis of demand.Firstly,this paper combs and analyzes the previous researches on the pricing and risk of structured financial products,so as to determine the specific writing ideas and writing framework.External data are selected to describe the current development of financial products market in China and abroad.Meanwhile,the development of structured financial products in some overseas markets is compared and analyzed.In the case of analysis part,this paper selects the index products linked to Shanghai and Shenzhen 300 for analysis.Monte Carlo Simulation method was used to determine pricing,and VaR was used to measure market risk through value-at-risk and sensitivity analysis.The following conclusions were drawn:In the pricing part of the case product,through the selection of reasonable volatility and risk-free interest rate to price the product,it is found that the theoretical value of the product is slightly higher than the actual value of the discount,the discount rate is not high,which is 1.06%.This number illustrates the rationality of the pricing of agricultural bank structured financial products.The final theoretical ending annualized return rate of this product was 4.69%,while the actual ending annualized return rate of this product was 5.7%.This is because the return rate of CSI 300 index during this period had already exceeded the second strike price of 5%,and the actual cumulative increase rate was over 20%.Although structured products can effectively mitigate risks,having certain financial investment literacy can still achieve higher returns.In the case of risk analysis,it is found that on the premise of 1 million principal,the features of medium and low risk in the product description are verified in the average VaR analysis and the relative VaR analysis.At the same time,there is a risk exposure yield difference of 0.89% between the two diameters of VaR,which reminds us that we need to consider the opportunity cost in the investment process.In this paper,product term,risk-free interest rate,CSI 300 index volatility and CSI 300 initial price are selected as sensitivity factors.It is found that the risk-free rate is the factor that has the greatest influence on the product value,which confirms the view of the importance of macro analysis to product selection.At the same time,the option portfolio is highly sensitive to the volatility of the index,which indicates the importance of selecting the underlying assets in the financial derivatives investment.Finally,this paper puts forward effective suggestions for government regulatory agencies and commercial banks to promote the development of structured financial management market.At the same time,some suggestions are also given for investors to invest in structured financial products.