Online from: 2007
Subject Area: Regional Management Studies
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|Title:||An exploratory study of a risk neutral pricing model of accumulators|
|Author(s):||Thomas Kwong, (Student at California Institute of Technology, Pasadena, California, USA), Daisy Fok, (Student at University of Southern California, Los Angeles, California, USA), Kern Kwong, (Professor at California State University (LA), Los Angeles, California, USA), Lillian Fok, (Professor at the University of New Orleans, New Orleans, Louisiana, USA)|
|Citation:||Thomas Kwong, Daisy Fok, Kern Kwong, Lillian Fok, (2012) "An exploratory study of a risk neutral pricing model of accumulators", Journal of Asia Business Studies, Vol. 6 Iss: 1, pp.93 - 113|
|Keywords:||Accumulator, Hong Kong, Pricing model, Risk management, Simulation, Stock prices|
|Article type:||Research paper|
|DOI:||10.1108/15587891211191407 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Acknowledgements:||Received: 2 November 2008 Accepted: 2 June 2010|
Purpose – Accumulators are cutting-edge stock derivative investments that have been the subject of much controversy in Hong Kong over the past year. Accumulators are exotic options composed of a full year of daily long up-and-out call options and short up-and-out put options. Because accumulators are so new, the understanding of accumulators is currently very limited. This paper attempts to characterize and understand the properties of this fairly unknown and new stock derivative investment.
Design/methodology/approach – The study analyzed and characterized accumulators based on observations from past history of 11 stocks of the Hang Seng Index. Using historical stock data covering from January 3, 2006, and onward, the profit and loss for each accumulator contract was calculated.
Findings – Through the research it is understood that the profit and loss of accumulator contracts depends primarily on the following factors: knockout percentage, discount percentage, variability of the underlying stock, and the overall market trends, among other factors.
Originality/value – This pioneer simulation is an empirical exploratory
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