A recursive method for static replication of autocallable structured products

Cited 0 time in webofscience Cited 0 time in scopus
  • Hit : 60
  • Download : 0
This paper discusses the problem of valuation and risk management of structured products, which have been popular in recent financial markets. We propose a recursive method based on static replication for a variety of structured products, and, in particular, focus on products with autocallable and barrier features under a general Markovian diffusion with killing. The core idea of the proposed algorithm is to recursively utilize the strike-spread approach and calendar-spread approach in the literature. To increase computational and practical feasibilities, we devise discrete static hedges and their convergence is analysed. Numerical experiments are conducted to confirm the effectiveness of our proposal and to show its highly accurate pricing and hedging performance.
Publisher
ROUTLEDGE JOURNALS
Issue Date
2019-04
Language
English
Article Type
Article
Citation

QUANTITATIVE FINANCE, v.19, no.4, pp.647 - 661

ISSN
1469-7688
DOI
10.1080/14697688.2018.1523546
URI
http://hdl.handle.net/10203/260868
Appears in Collection
IE-Journal Papers(저널논문)
Files in This Item
There are no files associated with this item.

qr_code

  • mendeley

    citeulike


rss_1.0 rss_2.0 atom_1.0