Case Study Of China Merchants Bank Stock Index Linked Structured Deposit Products

With the rapid development of national economic strength and the improvement of residents’ income,people’s awareness of pursuing asset preservation and appreciation is gradually enhanced.Compared with other financial products,structured deposit products can pursue higher expected returns while ensuring the safety of the principal,so they are favored by investors.However,due to its complex structure,it is difficult for investors to have a proper understanding of the products.This paper provides some suggestions for investors and commercial banks through a comprehensive analysis of structured deposit products.In this paper,a stock index-linked structured deposit product of China Merchants Bank is studied in three aspects:pricing,return and risk.In terms of pricing,considering the structural characteristics of the structured deposit product,this paper analyzes it in two parts:fixed income and option.Fixed income is priced by compound discounting,while options are priced by estimating volatility through Monte Carlo simulation on the basis of GARCH model.Finally,the theoretical price of the product is obtained.In terms of income,the expected rate of return of the product was calculated through the above Monte Carlo simulation event probability,and then the yield to maturity was compared with other bank structured deposit products of the same type and other financial investment instruments of the same maturity.Finally,sensitivity analysis was used to analyze the impact of related factors on the expected rate of return of the product.In the aspect of risk,qualitative analysis of several risks the product may encounter,and then quantitative analysis of the main market risks faced by the product using Va R method based on Monte Carlo simulation method.Finally,the following conclusions are reached:First,in terms of pricing,the theoretical price of this product is 300,776.9754 yuan,higher than the initial investment of 300,000 yuan,indicating that the product is issued at a discount and has investment value,but the issuer will bear a certain cost.Second,in terms of earnings,the expected rate of return of this product is 4.67% and the probability of obtaining 5.53% expected rate of return is 83.46%,which is worth buying by investors;Compared with similar products of other banks and other financial instruments of the same maturity,it is found that the expected rate of return of this product is higher;In the sensitivity analysis of factors affecting the expected rate of return of products,it is found that discount rate,volatility of underlying assets,barrier price and expected rate of return have a reverse change relationship,while observation points have a positive change relationship with them,and barrier price has the greatest influence on it.Third,in terms of risks,in the qualitative analysis of risks of this product,it is found that there are risks in market,credit,liquidity,operation,etc.;After the quantitative analysis of the main market risks faced by the product,it is found that the absolute Va R value is 4188.4932 yuan and the relative Va R value is 12924.4932 yuan at the 95%confidence level,and the maximum loss rate is 4.31%,which conforms to the characteristics of high risk and high return.Finally,combined with the above analysis,the structured deposits are enlightened from three aspects:investors,commercial banks,and regulators,respectively.Investors should have a full understanding of structured deposit products when purchasing them,and also learn more relevant professional knowledge in their spare time.Commercial banks should consider the professional level of investors when designing products,and can set different terms and conditions according to investment categories to further enhance the attractiveness to investors.Regulators should further develop disclosure policies on more details of such products and enhance investor education.