| In the past two years,the hot issuance of snowball products has promoted the rapid development of the over-the-counter derivatives market,and at the moment when the new asset management regulations are implemented and interest rates are low,snowball products have become the new favorite of the capital market because of their high coupons and high winning rates.However,due to the limited returns and unlimited risks of Snowball products,regulators have always emphasized their risks,and some media and investors also hold prejudices and misunderstandings about them.In this paper,taking the Non-Guaranteed Snowball Enhancement No.106 Income Certificate of An Fortune as an example,the Monte Carlo method and the finite difference method are used to price the snowball option,and the difference between the two is 0.81%,indicating that the pricing result is accurate.When using the finite difference method to calculate the price of snowball options,it is relatively simple and easy to use the static copy principle to split the snowball options into 4 different small options,and then price the split option combinations.Secondly,the full-life cycle return calculated by the finite difference method is drawn,a three-dimensional Greek value plot is drawn,the sensitivity analysis of the snowball option is performed,and the risk characteristics of the snowball option are analyzed.Finally,through scenario simulation,how the broker dynamically hedges delta risk,and how the qualitative analysis right broker hedges the Gamma and Vega risk.The main conclusions of this article are:(1)The essence of snowball options is Long Vega and Long Gamma,which earn hedging gains by "selling high and sucking low".(2)Snowball options are financial products that investors and brokers "share risks and share returns",and the main risks faced by both are knock-in risks.(3)The sources of high coupons for snowball options are mainly selling spreads,hedging gains and basis gains.(4)Snowball options have a high probability of knocking out,and the probability of obtaining the maximum return without knocking in or knocking out is less than 1%,and investors still have a certain probability of loss.(5)The advantage of the Monte Carlo method for snowball option pricing is that it is convenient and fast,easy to promote,but it is more time-consuming,and the Greek value calculation results are jittery and non-convergent;the outstanding advantage of the finite difference method is that the Greek value of the whole life cycle can be calculated,which is convenient for scenario simulation,but the disadvantage is that it is not easy to promote,and the process is more complicated. |
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