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French Retail Financial Structured Products: A Typology and Assessment of Their Fair Pricing

Author

Listed:
  • Philippe Bertrand

    (Aix-Marseille Université)

  • Jean-Luc Prigent

    (THEMA, University of Cergy-Pontoise)

Abstract

This paper deals with the pricing of financial structured products. We examine French retail structured products, “OPCVM. Formule”, from a sample including about 650 funds. First, we detail the main characteristics of this market and propose a simplified typology of all these products. Second, we analyze some of the most common contracts with portfolio insurance, which correspond to specific portfolio profiles based on performances of given underlying assets, usually the major French or European stock indices. Using the standard Black and Scholes pricing with appropriate financial parameters, we compute the initial values of such products. Our numerical results on the fair pricing of French financial structured products agree with previous studies in other countries, for example those for the German and Swiss markets. The magnitude of mispricing lies between 2 % and 7 %.

Suggested Citation

  • Philippe Bertrand & Jean-Luc Prigent, 2015. "French Retail Financial Structured Products: A Typology and Assessment of Their Fair Pricing," Bankers, Markets & Investors, ESKA Publishing, issue 135, pages 4-18, March-Apr.
  • Handle: RePEc:rbq:journl:i:135:p:4-18
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    File URL: http://www.revue-banque.fr/article/french-retail-financial-structured-products-typolo
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    Cited by:

    1. Bertrand, Philippe & Prigent, Jean-luc, 2019. "On the optimality of path-dependent structured funds: The cost of standardization," European Journal of Operational Research, Elsevier, vol. 277(1), pages 333-350.

    More about this item

    Keywords

    Portfolio Insurance; Structured Products; Option Pricing;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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