Publicação
PRIIP analysis: 9.20% p.a. barrier reverse convertible in EUR on Lufthansa (2024-2026)
| Resumo: | This study presents an in-depth quantitative analysis of a “9.20% P.A. Barrier Reverse Convertible in EUR on Lufthansa”, focusing on valuation, performance under varying market conditions, and investor suitability. The analysis begins with a brief decomposition of the product, outlining its key features, advantages, disadvantages, and embedded risks. To assess performance, a dual-model approach is employed: the Binomial Tree model captures early redemption logic with increasing accuracy as time-step granularity improves, while the Monte Carlo Simulation, enhanced with a GARCH (1,1) volatility model, incorporates time-varying volatility and better reflects market behavior. A rolling historical issuance analysis over a two-year period evaluates how changing market conditions affect expected value, capital loss risk, and coupon probability. The findings show that favorable issuance timing enhances expected returns and increases the likelihood of early redemption, while high volatility increases downside risk. Additionally, the comparison between simulation-based valuations and actual market prices suggests possible mispricings that could present investment opportunities. Overall, the research highlights the importance of dynamically volatility modeling and reinforces the role of advanced quantitative methods in understanding and pricing complex structured products. |
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| Autores principais: | Vaz, Lea Ribeiro |
| Assunto: | Structured Products Barrier Reverse Convertible Monte Carlo Simulation Binomial Tree Model Early Redemption GARCH Modeling Produtos Estruturados Reverse Convertible com Barreira Simulação de Monte Carlo Modelo de Árvore Binomial Resgate Antecipado Modelagem com GARCH |
| Ano: | 2025 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório da Universidade de Lisboa |
| Resumo: | This study presents an in-depth quantitative analysis of a “9.20% P.A. Barrier Reverse Convertible in EUR on Lufthansa”, focusing on valuation, performance under varying market conditions, and investor suitability. The analysis begins with a brief decomposition of the product, outlining its key features, advantages, disadvantages, and embedded risks. To assess performance, a dual-model approach is employed: the Binomial Tree model captures early redemption logic with increasing accuracy as time-step granularity improves, while the Monte Carlo Simulation, enhanced with a GARCH (1,1) volatility model, incorporates time-varying volatility and better reflects market behavior. A rolling historical issuance analysis over a two-year period evaluates how changing market conditions affect expected value, capital loss risk, and coupon probability. The findings show that favorable issuance timing enhances expected returns and increases the likelihood of early redemption, while high volatility increases downside risk. Additionally, the comparison between simulation-based valuations and actual market prices suggests possible mispricings that could present investment opportunities. Overall, the research highlights the importance of dynamically volatility modeling and reinforces the role of advanced quantitative methods in understanding and pricing complex structured products. |
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