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The Valuation of Structured Products: Empirical Findings for the Swiss Market

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  • Andreas Grünbichler

    ()

  • Hanspeter Wohlwend

    ()

Abstract

This article analyses the valuation of 192 structured products without a capital guarantee. In contrast to similar studies, this investigation takes in both the primary and the secondary market. Its central element is a comparison of the implied volatilities of the options contained in the structured products with those of comparable EUREX options. Generally speaking, the results may well come as a surprise both concerning the scale of the phenomenon detected and its significance. Taken as a whole, the results provide grounds for assuming that certain inefficiencies exist on the Swiss market for structured products and that lead managers manage to exploit their quasi-monopolistic position in a rational manner. Copyright Swiss Society for Financial Market Research 2005

Suggested Citation

  • Andreas Grünbichler & Hanspeter Wohlwend, 2005. "The Valuation of Structured Products: Empirical Findings for the Swiss Market," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 19(4), pages 361-380, December.
  • Handle: RePEc:kap:fmktpm:v:19:y:2005:i:4:p:361-380
    DOI: 10.1007/s11408-005-6457-3
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    References listed on IDEAS

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    1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    2. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    3. Eli M. Remolona & Stephen R. King, 1987. "The pricing and hedging of market index deposits," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 9-20.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Entrop, Oliver & Scholz, Hendrik & Wilkens, Marco, 2009. "The price-setting behavior of banks: An analysis of open-end leverage certificates on the German market," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 874-882, May.
    2. Margaria Abreu & Victor Mendes, 2017. "The Investor in Structured Retail Products: Marketing Driven or Gambling Oriented?," Working Papers Department of Economics 2017/19, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    3. Schertler, Andrea, 2016. "Pricing effects when competitors arrive: The case of discount certificates in Germany," Journal of Banking & Finance, Elsevier, vol. 68(C), pages 84-99.
    4. Martin Wallmeier, 2011. "Beyond payoff diagrams: how to present risk and return characteristics of structured products," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 25(3), pages 313-338, September.
    5. Baule, Rainer, 2011. "The order flow of discount certificates and issuer pricing behavior," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 3120-3133, November.
    6. Rossetto, Silvia & Bommel, Jos van, 2009. "Endless leverage certificates," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1543-1553, August.
    7. Baller, Stefanie & Entrop, Oliver & McKenzie, Michael & Wilkens, Marco, 2016. "Market makers’ optimal price-setting policy for exchange-traded certificates," Journal of Banking & Finance, Elsevier, vol. 71(C), pages 206-226.
    8. repec:bap:journl:170306 is not listed on IDEAS
    9. Victor Mendes & Margarida Abreu, 2014. "The Investor in Structured Retail Products: Marketing Driven or Gambling Oriented?," EcoMod2014 6621, EcoMod.
    10. Margarida Abreu & Victor Mendes, 2017. "The Investor in Structured Retail Products: Marketing Driven or Gambling Oriented?," Working Papers REM 2017/14, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    11. Thorsten Hens & Marc Oliver Rieger, 2014. "Can utility optimization explain the demand for structured investment products?," Quantitative Finance, Taylor & Francis Journals, vol. 14(4), pages 673-681, April.
    12. Arnold, Marc & Schuette, Dustin & Wagner, Alexander, 2014. "Neglected Risk: Evidence from Structured Product Counterparty Exposure," Working Papers on Finance 1406, University of St. Gallen, School of Finance, revised Apr 2016.
    13. Sabrina Orsi Kittani & Afonso De Campos Pinto, 2014. "Produtos Estruturados No Mercadobrasileiro: Uma Análise Sobre A Sua Valorização Entre 2006 E 2011," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 135, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    14. repec:exl:25engi:v:28:y:2017:i:3:p:262-270 is not listed on IDEAS
    15. Ammann, Manuel & Arnold, Marc & Straumann, Simon, 2017. "Illuminating the Dark Side of Financial Innovation: The Role of Investor Information," Working Papers on Finance 1704, University of St. Gallen, School of Finance.

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