We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the...

In this paper we introduce a new financial product named Outperformance Certificates. We study the €43 billion sample by examining 1,507 issues of the certificates outstanding in August 2005 issued by banks in Europe. We present formulas to price the certificates and empirically examine the...

We use a unique data set from the Trade Reporting and Compliance Engine (TRACE) to study liquidity e ffects in the US structured product market. Our main contribution is the analysis of the relation between the accuracy in measuring liquidity and the potential degree of disclosure. Having access...

This paper demonstrates how risk control as applied to popular investment products can be based on a fallacy. In scope are option-based capital protected products and rules-based portfolio insurance products. In case of structured products risk control shifts the option¡¯s volatility risk from...

The recent financial crisis raised awareness of the need for a framework for conducting macroprudential policy. Identifying as early as possible and addressing the buildup of endogenous imbalances, exogenous shocks, and contagion from financial markets, market infrastructures, and financial...

Despite their impressive market success, investment certificates' benefits are puzzling from both a theoretical and an empirical viewpoint. Previous research analyzed portfoliotheoretical issues, mispricing patterns, and counterparty risk. This work highlights the impact of taxation, which has...

В статье рассматриваются банковские продуктовые инновации, связанные с созданием инвестиционных депозитов на основе структурных продуктов. Статья содержит...

This work deals with the issue of investors’ irrational behavior and financial products’ misperception. The theoretical analysis of the mechanisms driving erroneous assessment of investment performances is explored. The study is supported by the application of Monte Carlo simulations to the...

The new regulation of the EU for financial products (UCITS IV) prescribes Value at Risk (VaR) as the benchmark for assessing the risk of structured products. We discuss the limitations of this approach and show that, in theory, the expected return of structured products is unbounded while the...