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Pricing structured products in China: The role of product features, bank ownership, and regulatory reform

Author

Listed:
  • Zhou, Hanxian
  • Pan, Chenxin
  • Li, Yushuang
  • Chen, Rongda

Abstract

This study investigates how product features (complexity, duration), issuer ownership, and regulatory reforms jointly shape the pricing of structured products in China. Using a sample of 349 equity index-linked products issued between 2017 and 2019, we report three key findings. First, both complexity and duration significantly reduce premiums, reflecting the dominance of retail investors and the limited liquidity of structured products in China. Second, while state-owned banks have higher average premiums due to stronger investor trust and scale economies, non-state-owned banks more effectively extract premiums from complex and long-term products, possibly through aggressive marketing or opaque product design. Third, premiums for complex, long-maturity products increase as regulation progresses, suggesting new investors are less sensitive to complexity and liquidity risk. The results highlight the interactions between product design, issuer type, and regulatory change in shaping pricing dynamics of structured products in a market with unique features.

Suggested Citation

  • Zhou, Hanxian & Pan, Chenxin & Li, Yushuang & Chen, Rongda, 2025. "Pricing structured products in China: The role of product features, bank ownership, and regulatory reform," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325015193
    DOI: 10.1016/j.frl.2025.108265
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    References listed on IDEAS

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