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RBC LiONS™ S&P 500 Buffered Protection Securities (USD) Series 4 Analysis Option Pricing Analysis, Issuing Company Risk-hedging Analysis, and Recommended Investment Strategy

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  • Tan, Zekuang

Abstract

This paper will compute the value of the RBC financial derivative-RBC LiONS™ S&P 500 Buffered Protection Securities (USD), Series 4 by utilizing the Black-Scholes Option Pricing Model. In order conduct a thorough analysis of the securities, the paper will compare the model value with the actual price at which the security was issued and the price at which it was traded. This model will help establish a recommended strategy for the issuing company to hedge the liability incurred by the security issued, and provide a possible hedging strategy for the investors.

Suggested Citation

  • Tan, Zekuang, 2017. "RBC LiONS™ S&P 500 Buffered Protection Securities (USD) Series 4 Analysis Option Pricing Analysis, Issuing Company Risk-hedging Analysis, and Recommended Investment Strategy," MPRA Paper 83669, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:83669
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    File URL: https://mpra.ub.uni-muenchen.de/83669/1/MPRA_paper_83669.pdf
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    References listed on IDEAS

    as
    1. MacBeth, James D & Merville, Larry J, 1979. "An Empirical Examination of the Black-Scholes Call Option Pricing Model," Journal of Finance, American Finance Association, vol. 34(5), pages 1173-1186, December.
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    More about this item

    Keywords

    Black-Scholes Model; Delta Hedging; Geometric Brownian Motion; risk-less arbitrage;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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