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Index
Cover
Title
Copyright
Contents
List of figures
List of tables
Preface
1 Survey and classification of structured products
1.1 Background
1.2 Literature review
1.2.1 History and product development
1.3 History and market development
1.4 The goals and purposes of structured products
1.5 The classification of structured products
1.5.1 Classification by levels of principal protection
1.5.2 Classification by quantity of payments
1.5.3 Classification by type of underlying asset
1.5.4 Classification by form of structured product
1.5.5 Classification by type of investor
1.5.6 Classification by behavior of underlying assets
1.5.7 Classification by degree to which payoff depends on price path of underlying asset
1.5.8 Classification by payoff functions
1.6 Case analysis
1.6.1 Non-deliverable swap
1.7 Mechanism of non-deliverable swap
1.7.1 Case 1 (double touch)
1.7.2 Case 2 (single touch)
1.8 Basic analysis for buyer
1.9 Auto-callable ratio par forward
1.9.1 Mechanism of auto-callable ratio par forward
1.9.2 The original (one-time knock-out) type
1.9.3 Multiple knock-out (or American knock-out) type
1.9.4 The guarantee type (based on American knock-out)
1.9.5 The bonus type
1.9.6 Basic analysis of one-time knock-out type
Further Reading
2 Tools and methods for pricing exotic options
2.1 Background
2.1.1 Assumptions for BS model
2.2 European option
2.2.1 Pricing
2.3 American option
2.3.1 Pricing
2.4 Asian options
2.4.1 Pricing
2.5 Barrier options
2.5.1 Pricing
References
3 Stochastic and local volatility models, volatility surface, term structure, and break-even volatility
3.1 Implied volatility, volatility surface, and term structure
3.1.1 Implied volatility
3.1.2 Volatility surface
3.1.3 Volatility term structure
3.2 Local volatility model
3.2.1 Local volatility model
3.2.2 Mean-reversion process
3.2.3 Local volatility surface
3.3 Stochastic volatility
3.3.1 Heston model
3.3.2 CEV model
3.3.3 Empirical analysis
3.4 An adaptive correlation Heston model for stock prediction
3.4.1 Adaptive correlation Heston model
3.4.2 Empirical Analysis
References
4 Market view formation
4.1 Equity market view formation
4.1.1 Volatility forecast
4.2 Volatility modeling
4.2.1 Price forecast
4.2.2 Simple trading strategies under various scenarios
4.3 Foreign exchange market view formation
4.3.1 Volatility and rate forecast
4.4 Simple trading strategies under various scenarios
4.4.1 Appreciation with small volatility: FX range bet digital option
4.4.2 Sharp depreciation: Bullish G7
4.5 Conclusion
References
5 Structured equity products
5.1 Equity accumulator with honeymoon
5.1.1 Basic analysis
5.1.2 Pricing
5.2 Heston model
5.2.1 Calibration
5.3 Approximate analytical solution
5.3.1 Price with analytical solution
5.4 Risk and hedging
5.4.1 Use vanilla option for hedge
5.4.2 Use VIX for hedge
5.4.3 Dynamic hedge with greek letters
5.5 Equity accumulator with advance delivery
5.5.1 Basic analysis
5.6 Advance delivery
5.7 Factors that affect the value of the contract
5.8 Product highlights and risks
5.9 Summary
5.9.1 Pricing
5.10 Parameters
5.10.1 Trading days
5.10.2 Interest rates
5.10.3 Volatilities
5.10.4 Stock prices
5.11 Algorithm
5.11.1 Pricing results
5.11.2 Greeks
5.12 SW05—Daily callable fixed coupon swap (Equity)
5.12.1 Basic analysis
5.12.2 Pricing
5.13 Monte Carlo simulation
5.13.1 Pricing result and greeks
5.14 Conclusion
6 Foreign exchange-linked structured products
6.1 Bullish G7
6.1.1 Basic analysis
6.1.2 Bullish G7—a combination
6.1.3 Pricing
6.1.4 Closed-form BS model
6.2 Monte Carlo simulation
6.2.1 Implied volatility surface
6.2.2 Analysis of the greeks
6.3 Hedging strategies
6.3.1 EKIKO 1
6.3.2 Basic analysis
6.3.3 Pricing
6.4 Heston Model
6.4.1 Dupire model and implied volatility surface
6.4.2 Risk and hedging
6.4.3 Analysis of greeks—EKIKO 1A
6.4.4 Analysis of greeks—EKIKO 1B
6.5 Hedging strategy
6.5.1 FX ratio par forward
6.5.2 Basic analysis
Index
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