Barrier options
Barclays offers choice of barriers
Barrier picking
Product performance
The three products reviewed this month all have a strike date of 11 December 2009. The products are valued weekly and the results are shown along with the performance of the underlying asset. All three products are fairly typical of products that are…
Morgan Stanley Jump
Morgan Stanley has issued Jump Securities, a structured products based on the performance of a basket composed of the iShares MSCI Emerging Markets Index Fund and the Dow Jones Eurostoxx 50. Principal is not protected and the upside above the target…
Barrier remains intact
The 50% barrier in the Investec Capital Protected FTSE 100 Income Plan 1 has remained in place since the launch of the product last year. Those opting for monthly or quarterly payments will have received their coupons, and the same looks likely for those…
Product performance
Comparing principal-protected, accelerated growth and reverse convertible products with September 2009 strike dates
Retrospective: Avoiding the barriers
This JP Morgan product from November 2008 linked to a basket of four Asian indexes and promised a 2.05% quarterly income payment. In the event of a kickout, however, capital was placed at risk and the amount returned to investors would depend on the…
Product performance
Comparing principal-protected, accelerated growth and reverse convertible products with August 2009 strike dates
UK accumulation
Barclays is offering an accumulator product based on the FTSE 100, with lock-ins for every 15% rise in the index subject to a 60% cap. If the index does not trade above a 115% strike level and the 50% protection barrier is breached, capital is not…
Product performance
We compare principal-protected, accelerated growth and reverse convertible products with May 2009 strike dates
Beware the breaches
Credit Suisse has produced a two-year booster cert plus securities product that offers access to the full upside of the performance of the iShares Emerging Markets Index Fund. There is a 70% barrier, and a limit to uncapped returns if an upper barrier of
Risking the first 10%
Gilliat Financial Solutions is offering a six-year income product linked to the FTSE 100 that promises a fixed coupon as well as bonus payments, but only if investors are prepared to put 10% of their capital at risk
The simple life
Structured products
Profiting from divergence
Interest Rates
Credit barrier models
Claudio Albanese, Giuseppe Campolieti, Oliver Chen and Andrei Zavidonov construct an analytic credit barrier model driven by credit ratings, constrained to fit the term structure of credit spreads
Capturing the smile
Since the discovery that traditional calibration methods fail to capture the dynamics of the smile, new approaches based on mixtures or ensembles of models have been developed. Simon Johnson and Han Lee present a variant of this approach that can be used…
Exotic spectra
Eigenfunction expansions can also be applied to finance. The method is particularly suited to barrier and Asian options, with convergence properties that compare favourably with Monte Carlo.
Black-Scholes goes hypergeometric
Option pricing models
Behind the mirror
Barrier options
Image options and the road to barriers
Barrier options
Static barriers
Exotic options