Publicação
PRIIP analysis: 3-year USD capped twin-win certificate on the S&P 500® index (2021 – 2024)
| Resumo: | This project aims to value and analyse the risk profile of the 3-Year USD Capped TwinWin Certificate on the S&P 500® Index, issued in April 2021 by Goldman Sachs International. The Certificate is a participation type, path-dependent product, with a down-and-out American barrier, a cap and a Twin-Win feature that allows for positive returns in both upward and downward market movements, under the condition that the barrier is not breached. It is suited for moderately risk-averse investors seeking exposure to the S&P 500® Index without taking a directional bet on the market. Product valuation is performed through Monte Carlo simulation and closed-form solutions, building upon the Black Scholes framework. For each method, the product is decomposed in two different ways, using simplified payoff scenarios and in terms of barrier options. The pricing of the product is studied under two volatility scenarios in order to infer which level the issuer likely used to price the product at par. Further analysis focuses on assessing the product’s risk and return profile. A scenario probability analysis evaluates the likelihood of certain outcomes, especially regarding barrier breach events. The feature sensitivity analysis explores how changes in the product design affect the barrier breach probabilities and, ultimately, the final value of the product. The Greeks are computed to assess the sensitivity of the product to different parameters, revealing Vega as the most reactive letter. Finally, the Value-at-Risk and Conditional Value-at-Risk are estimated to identify the magnitude of potential losses under extreme scenarios and try to summarize the product’s risk into a simple metric. This study concludes that Monte Carlo simulation provides a flexible and effective approach for valuing complex structured products, aligning closely with closed-form option pricing techniques. It is demonstrated that the same product can be decomposed in multiple valid ways. Although the product is designed to benefit from controlled volatility environment, even a slight increase in this parameter decreases the product’s value. |
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| Autores principais: | Almeida, Constança Osório de |
| Assunto: | Structured Products American Barrier Twin-Win feature Monte Carlo Simulation Closed-form solutions Greeks Value-at-Risk Produtos Estruturados Barreira Americana Twin-Win Simulação de Monte Carlo Soluções de fórmula fechada Greeks Value-at-Risk |
| Ano: | 2025 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso restrito |
| Instituição associada: | Universidade de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório da Universidade de Lisboa |
| Resumo: | This project aims to value and analyse the risk profile of the 3-Year USD Capped TwinWin Certificate on the S&P 500® Index, issued in April 2021 by Goldman Sachs International. The Certificate is a participation type, path-dependent product, with a down-and-out American barrier, a cap and a Twin-Win feature that allows for positive returns in both upward and downward market movements, under the condition that the barrier is not breached. It is suited for moderately risk-averse investors seeking exposure to the S&P 500® Index without taking a directional bet on the market. Product valuation is performed through Monte Carlo simulation and closed-form solutions, building upon the Black Scholes framework. For each method, the product is decomposed in two different ways, using simplified payoff scenarios and in terms of barrier options. The pricing of the product is studied under two volatility scenarios in order to infer which level the issuer likely used to price the product at par. Further analysis focuses on assessing the product’s risk and return profile. A scenario probability analysis evaluates the likelihood of certain outcomes, especially regarding barrier breach events. The feature sensitivity analysis explores how changes in the product design affect the barrier breach probabilities and, ultimately, the final value of the product. The Greeks are computed to assess the sensitivity of the product to different parameters, revealing Vega as the most reactive letter. Finally, the Value-at-Risk and Conditional Value-at-Risk are estimated to identify the magnitude of potential losses under extreme scenarios and try to summarize the product’s risk into a simple metric. This study concludes that Monte Carlo simulation provides a flexible and effective approach for valuing complex structured products, aligning closely with closed-form option pricing techniques. It is demonstrated that the same product can be decomposed in multiple valid ways. Although the product is designed to benefit from controlled volatility environment, even a slight increase in this parameter decreases the product’s value. |
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