The main aim of the paper is to measure hedging efficiency using the Short Put Ladder strategy formed by barrier options in the equity market. The researchers hedge full protection against price’s drop, combining the European down and knock-in put options with the lowest exercise price and vanilla or barrier put options with the higher exercise prices. The authors chose the analyzed alternatives according to the requirement of the zero-cost strategy. The aim of the investigated hedging variants is to secure the minimum constant selling price for the underlying asset’s price drop. Theoretical results of this approach were applied in the equity market, i.e., SPDR S&P 500 ETF. The authors analyzed and compared all hedging variants to each other, however, only the selected techniques were presented in the paper. The findings reveal that the barrier options used for managing the equity risk produce significant reductions of that risk. The right combination of options with the strike prices and the barrier levels wisely selected plays a significant role in risk elimination. Finally, according to the findings, the recommendations for potential investors are introduced.
The aim of the paper is to focus on modifications of express certificates. The paper shows the creation techniques of a new express certificate using two-asset correlation options and barrier options, which play the central role in financial engineering. Different possibilities of investment are investigated for the issuers and potential investor's point of view. Methodology of the paper is based on European style two-asset correlation options whose payoff is based on two underlying assets with two strike prices and barrier options. Due to the lack of real-traded two asset correlation options and barrier options, own calculations of option premiums are processed in MS Excel and statistical program R. Also, the pricing of the new express certificate with different parameters is examines with the showing of cost and profits for issuer and investor. Theoretical value of the modifications of express certificate with different levels of its parameters on the stocks Sanofi S.A. and Nestle S.A is obtained and it is performed the analysis of the profitability for to the issuer and investor at the maturity date. There is showed which parameters the investor should pay attention when deciding to invest into the given express certificate. Specific characteristics of proposed express certificate and its modification are pointed out and compared to each other. Also, minimum profit for issuer and for the investor in an ideal situation is presented. Proposed certificates can be part of a personal investment portfolio.
The paper deals with investing in agriculture based on structured products, which gains an important position in international investment for both institutional and retail investors. The aim of the paper is to present the proposal of two new types of investment certificates, i.e. Twin-Win Outperformance certificates and Capped Twin-Win Outperformance certificates, which belong to the segment of partially guaranteed investment tools due to a security buffer. The advantage the proposed certificates lies in the combination of the features of two certificates into one product. The certificates are described in an analytical form of the profit functions which are derived based on two components, i.e. the underlying asset and the derivative (used European call options and down and knock-out put barrier options) on its underlying asset. The pricing formulas are developed with a specification of the issue price sensitivity on changes in different input parameters. Opportunities to invest in these proposed certificates are being demonstrated in the agricultural market, i.e. Teucrium Corn Fund ETF, where various variants of these certificates are created based on different level of included parameters. The best results are performed with the objective to increasing of the intellectualization of all potential investors in investing to agriculture using corn futures.
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