The Pricing of Structured Products in Germany

The Journal of Derivatives, Vol. 11, pp. 55-69, Fall 2003

Posted: 18 Aug 2008 Last revised: 25 Aug 2008

See all articles by Sascha Wilkens

Sascha Wilkens

Independent

Carsten Erner

Klaus Röder

University of Regensburg - Faculty of Business, Economics & Information Systems

Date Written: August, 18 2008

Abstract

This article examines the issuer pricing of structured products during exchange trading in November 2001, comparing daily closing quotes of roughly 170 reverse convertibles and 740 discount certificates to values based on duplication strategies using call options traded on the Eurex (European Exchange). It investigates the average price differences depending on product type, issuer, and underlying, with special attention given to the possible influence of order flow. That is, do price quotes depend on the expected volume of purchases and sales? The results reveal significant differences between the pricing of structured products and duplication cost, which seem mostly in favor of the issuing institution.

Keywords: Reverse Convertible, Discount Certificate, Implied Volatility, Market Microstructure

JEL Classification: G13, G24

Suggested Citation

Wilkens, Sascha and Erner, Carsten and Röder, Klaus, The Pricing of Structured Products in Germany (August, 18 2008). The Journal of Derivatives, Vol. 11, pp. 55-69, Fall 2003, Available at SSRN: https://ssrn.com/abstract=1234016

Sascha Wilkens

Independent

No Address Available

Klaus Röder

University of Regensburg - Faculty of Business, Economics & Information Systems ( email )

Universitstrasse 31
Regensberg D-93053
Germany

No contact information is available for Carsten Erner

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