I had already posted a bonus certificate on Brent Crude Oil several weeks ago, which would have performed quite well if … Readmore…
Single Products and Markets
Weblog about specific products and market opportunities
Posts Tagged ‘90%’
Short Term Capital Guarantee
Thursday, October 8th, 2009 by Andreas BlümkeBelieve it or not, but even with these low interest rates, I succeeded, after much bloomberg pricing, to construct a capital guaranteed product that I would even buy myself. It’s a 9-month product with 90% capital guarantee and 80% participation. Doesn’t sound like much? Well, you must know that the strike of the call is placed at 90% of the capital guarantee. That way, even if the market doesn’t move an inch until expiry, I only lose about 2% and the initial delta is around 55%.
Now if the market rises further I participate to 80% with practically no initial loss to the participation, but if it drops and we get a double-dip, the most I lose is 10%. And the short maturity enables me to get back quickly in the market. In other words, no impact if interest rates suddenly rise and a pretty good reactivity to the market. Any comments? Let me know.
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