| With the development of China’s option market and the improvement of the professional capabilities of securities companies,the products of the option market continue to innovate.In this context,standard OTC options can no longer meet the personalized investment needs of investors.Due to the characteristics and advantages of personalization,customization,and high flexibility,OTC options greatly meet the diversified investment needs of investors in the market,attracting more and more investors’ attention in the market.The emergence of more and more high-quality OTC derivatives can,on the one hand,increase investors’ choices,provide more investment opportunities,and enrich investment targets in the market;On the other hand,it also puts forward higher requirements for the investment ability of investors and the risk control ability of securities companies in the market.Snowball products are the most dazzling OTC derivatives developed in recent years,belonging to a type of barrier options,and are representative products launched by securities companies in integrating their own advantages and business innovation.Its essence is a "put option with trigger conditions" that investors sell to securities companies.This type of put option adds two barrier prices as a trigger condition.As long as the linked target does not fall significantly for a period of time,investors can obtain benefits.The advantage of snowball products is that they provide investors with a layer of buffer space.As long as the market is not in a unilateral downward bear market,the returns of snowball products will become larger and larger like snowballs.The characteristics of its high coupon rate,high winning rate,flexible income structure,and investors only having to bear tail risk are extremely attractive to investors.It is a highly cost-effective asset allocation tool in the market in recent years,while the complex income structure of Snowball products also brings certain difficulties to product pricing and risk management.This paper takes the "high PR automatic knock in and out structure" issued by CITIC Securities as an example to systematically study the pricing,revenue,and risk control issues of snowball products.This article first introduces the release background,contract elements,and product structure of the product,and describes its revenue scenarios under different price paths.Then,use the Monte Carlo simulation method to conduct a numerical analysis of the price of the product,and based on the Monte Carlo simulation results,conduct a sensitivity analysis of the product’s earnings,to study the factors that affect the earnings of snowball products.Secondly,calculate the value at risk Va R to measure the risk of the product.Finally,based on the research in this article,relevant suggestions are proposed for the problems faced in the current development process of snowball products in China. |
