Income And Risk Analysis Of China Merchants Bank’s Structured Deposit Products Linked To China Securities 500 Index

In recent years,China’s financial market has developed rapidly,and a variety of investment tools have sprung up.In addition,the new regulations on asset management in 2018 clearly pointed out that financial products should break the rigid exchange and transform to net worth.This meant that principal guaranteed financial products exit the market,which virtually increases the pressure on commercial banks to collect deposits and transform.Structured deposit is an innovative deposit product embedded in financial derivatives.According to relevant regulations,it is a product that commercial banks can guarantee the principal,which is favored by investors and banks.Nowadays,there are more and more structured deposit products with complex structure in the market,but no matter what type,the core lies in its income trigger mechanism.Hence,it is particularly indispensable to analyze the income and risk of structured deposit products.We take China Merchants Bank’s structured deposit products linked to China Securities 500 index as an example,this thesis selects three different structural products: interval shock type,automatic redemption type and shark fin type,which can comprehensively represent the structural deposit products linked to the CSI 500 index issued by China Merchants Bank.Firstly,it analyzes the relevant situation of structured deposit market.Afterwards,it makes a descriptive statistical analysis of 424 products linked to the China Securities 500 index on sale from three aspects: the issuance status,term and expected rate of return of structured deposit products.In the empirical research of product return and risk,we use GARCH model to estimate the price volatility of the underlying asset,and then use Monte-carlo simulation method to simulate its price path.According to the income trigger terms of different types of products,the probability distribution that a given expected rate of return can achieve is calculated.After that,we need conduct qualitative and quantitative analysis on the risks faced by the structured deposit products.Firstly,it summarizes the risks faced by the product,and then uses single factor sensitivity analysis,finally,the market risk faced by the case product is judged by measuring Va R.The empirical result of the study demonstrates that the overall performance of China Merchants Bank’s structured deposit products linked to the CSI 500 index is good,and the income and risk are within a reasonable range.Interval shock products are more likely to trigger intermediate grade yield,which is appropriate for the various types of customers;Automatic redemption products are more likely to trigger the highest rate of return when they expire,which is suitable for risk enthusiasts and risk neutral investors;Shark fin products are provided with knock-out mechanism and yield function,it appeared a strong possibility that they won’t be knocked down.Generally,products will obtain medium and low yield.Therefore,risk averse investors are not recommended to invest in such products.In addition,the study found that when the price volatility of China Securities 500 index is high,it is more favorable to buy bullish three-tier interval products and shark fin products;Automatic redemption products are less sensitive to asset price fluctuations.The products are not sensitive to the change of opening price and are relatively stable in the current market.Combined with the analysis of typical case products in the above part,it can be concluded that the product has problems in linked assets,subscription starting point and closed-end management,and gets optimization suggestions.Eventually,it puts forward relevant suggestions from three aspects: investors,issuing banks and regulators.