Prisfastsættelse af strukturerede produkter

Lea Brink Gansted & Andreas Gerlif

Student thesis: Master thesis


The first structured products were introduced on the Danish market in the late 1990s and since then they have become very popular, especially among private investors. Up until 2007 the market saw a heavy increase in the volume of structured products, but over the last couple of years there has been a drastic decline in the volumes. The structured products have been subject to massive critique in recent years which might offer an explanation for the decline in volumes. The critics tend to agree that the products are too complex and suffer from a great lack of transparancy. This makes the products very hard for private investors to fully understand. This thesis gives an introduction to the Danish market for structured products. It presents the reader with details regarding the structure of the products, the evolution in the market and some incentives for private investors to invest in the structured products. Furthermore it introduces the reader to the theoretical background for the pricing of structured products including bond pricing, asset price dynamics and option pricing theory. The option pricing theory includes an introduction to the Black-Scholes model as well as the Heston model. The models are compared based on their key assumptions and respective return distributions. In the final part of the thesis we calculate the price of two structured products: PLUS 7 Index Super 2013 and KommuneKredit Aktiekurv 2012. The main purpose of this exercise is to examine the parameters required to price the instruments and to determine whether or not the products were sold at a fair price at the time of issuing. The products are priced using Monte Carlo simulation and the two option pricing models presented in the theory. The reader is presented with the inputdata for the models, the calibration of parameters in the Heston model and the general pricing mechanism of the two products. Our results show that by using the two option pricing models, we get different prices for the products. We find that the Heston model tends to give the highest price. When comparing our calculated prices to the prices at which the products were initially sold, it becomes clear that the products were sold at a much too high price. This indicates that the investors are paying some indirect costs when purchasing the products and we therefore discuss where in the issuing process these costs can occur and whether or not they can be justified. Our conclusion is that it is impossible to figure out where these hidden costs strain from because of the complexity and lack of transparancy associated with this type of products. Based on our investigations we conclude that the critics are right when they argue that these products are too complex for private investors to understand. We argue that in some cases the complex structure can be rewarding for private investors, but most private investors would be better off by investing in less complex structures. This would enable them to understand the prices of the different parts of the product and thereby enable them to understand the price of the structured product itself.

EducationsMSc in Business Administration and Management Science, (Graduate Programme) Final Thesis
Publication date2011
Number of pages146