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Pricing an Equity-Linked Security with Non-Guaranteed Principal
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Pricing an Equity-Linked Security with Non-Guaranteed Principal
Cho, Jae-Koang; Lee, Hang-Suck;
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Equity-linked securities (ELS) provide their customers with the return linked to the underlying equity (or equities). Equity-linked products in Korea have recently gained popularity due to relatively low interest rates. This paper discusses an equity-linked security whose principal is not guaranteed. The payoff of the ELS depends on the returns of two underlying assets. This paper presents numerical prices of the proposed product by using Monte-Carlo simulation method. It assumes that the log-returns of two stocks follow either Brownian motion or variance gamma process. Finally, the comparison of the two approaches is discussed.
Equity-linked security;geometric Brownian motion;variance-gamma process;
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배리어 옵션이 내재된 지수연동형 보험상품의 가격결정,신승희;이항석;

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