Financial Engineering With Options and Its Implementation for Issuing of New Financial Innovations
Purpose: The purpose of the paper is to focus on innovative structured products − investment certificates. The paper shows the creation techniques of a new discount basket certificate using two-asset correlation options, which play the central role in financial engineering. The possibilities of...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
NGO “Economic Laboratory for Transition Research” (ELIT)
2017-09-01
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| Series: | Montenegrin Journal of Economics |
| Subjects: | |
| Online Access: | http://www.mnje.com/sites/mnje.com/files/007-018_m._bobrikova_m._harcarikova.pdf |
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| Summary: | Purpose: The purpose of the paper is to focus on innovative structured
products − investment certificates. The paper shows the creation
techniques of a new discount basket certificate using two-asset
correlation options, which play the central role in financial engineering.
The possibilities of investment using given certificates are investigated
for potential investors.
Methodology: Methodology of the paper is based on European style
two-asset correlation options in analytical expression whose payoff
is based on two underlying assets with two strike prices. Due to the
lack of real-traded two asset correlation option data, own calculations
of option premiums are processed in statistical program R.
Also, the pricing of the new discount basket certificate is examines.
Approach: Theoretical value of the new discount basket certificate
with different levels of its parameters on the stocks Facebook and
Google is obtained and it is performed the analysis of the profitability
for to the investor at the maturity date. Also, there is showed
which parameters the investor should pay attention when deciding
to invest into the given investment certificate.
Findings: Specific characteristics of each proposed certificate are
pointed out and compared to each other with conclusion that every
certificate can be the most profitable in specific price development
of the underlying assets, but not in every price development. Ideas
on how this certificate can be part of a personal investment portfolio
are also presented. |
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| ISSN: | 1800-5845 1800-6698 |