• Title/Summary/Keyword: Equity Linked Securities

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Model Averaging Methods for Estimating Implied and Local Volatility Surfaces

  • Kim, Nam-Hyoung;Lee, Jae-Wook;Han, Gyu-Sik
    • Industrial Engineering and Management Systems
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    • v.8 no.2
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    • pp.93-100
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    • 2009
  • In this paper, we review widely used methods to extract local volatility surfaces (LVSs) from implied volatility surfaces (IVSs) and suggest a model averaging method for constructing implied and local volatility surfaces weighted by trading volumes. It makes use of model averaging method by means of bandwidth priors, and then produces a robust LVS estimation. The method is shown to provide the information about the confidence interval of estimators as well as a rather less variable weighted mean value for the IVS and LVS. To show the merits of our proposed method, we conduct simulations on equity-linked warrants (ELWs) with reasonable and acceptable results.

A Study of Investment effectiveness about Equity Linked Securities(ELS) ; focused on Step-down type ELS (주가연계증권(ELS)의 투자효과에 관한 연구 : 스텝다운형 ELS를 중심으로)

  • Jung, Heeseog;Kim, Sunje
    • Journal of Service Research and Studies
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    • v.8 no.1
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    • pp.103-122
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    • 2018
  • The purpose of this study is to present the direction of ELS investment by analyzing the actual investment return of the ELS commodities and analyzing the investment effect of ELS that investors have felt unsatisfactory at financial marketing service. The research method is based on the step-down type ELS. We calculated the probability of achieving early redemption condition and maturity repayment condition, early redemption estimated yield, and maturity repayment estimated yield. As the study result, the probability of achieving 100% of the early redemption condition was 74.5%, and the probability of the early redemption condition 95% was 83.0%, 90% was 89.5%, 85% was 92.5%, and 80% was 96.5% respectively. In the case of the lowest 75%, the probability of holding to maturity is analyzed to be 2.5%, and the probability of early redemption is high. The probability of the stock price growth within 65% of the maturity repayment condition was 98.5% and the probability of the stock price growth within 60%~45% of the maturity repayment condition was 100%. 65% of maturity repayment condition was analyzed as 1.5% risk of principal loss, and the probability of achieving the committed yield of maturity was high. As a key measure of ELS investment, it is advantageous to select a commodity with a low rate of maturity repayment and a high rate of early redemption.