Falling volatility has reduced the price of call options, meaning more money to spend on the option, which is expressed as a higher gearing. However, low interest rates continue to hold up the value of the zero coupon bond, mitigating the benefit of lower volatility.
Last month we analysed a five-year FTSE 100 product and, using the usual parameters, calculated that a gearing of 87% could be offered (credit risk was not taken into account). This month, using the same parameters and all other ter
The week on Risk.net, July 14–20, 2017Receive this by email