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Proposal of new outperformance certificates in agricultural market

Author

Listed:
  • Monika HARČARIKOVÁ

    (Department of Finance, Faculty of Economics, Technical University of Košice, Košice, Slovak Republic)

Abstract

The paper analyses new structured financial products in agricultural market with the aim to gain in the declining trends. There are presented the reverse outperformance and the capped reverse outperformance certificates from the point of view of their investors and provided detailed descriptions of the profit functions in the analytical form. It is shown that the payoff of these certificates is an engineered from a combination of the traditional financial instrument and derivative products, especially the vanilla options. Further, there are developed formulas for pricing of these certificates and specified the conditions under which the issuer is profitable in the primary market. Also the profitability for the individual investor at the future trade date is presented. Several certificates for these types of certificates associated with the soybean futures contracts are designed and compared with the best results for the investor. The presented approach is based on the soybean options contracts traded on the Chicago Board of Trade.

Suggested Citation

  • Monika HARČARIKOVÁ, 2015. "Proposal of new outperformance certificates in agricultural market," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(9), pages 400-409.
    • Handle: RePEc:caa:jnlage:v:61:y:2015:i:9:id:199-2014-agricecon
    DOI: 10.17221/199/2014-AGRICECON
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    References listed on IDEAS

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    2. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    3. Josef TAUŠER & Radek ČAJKA, 2014. "Hedging techniques in commodity risk management," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(4), pages 174-182.
    4. Rodrigo Hernández & Wayne Lee & Pu Liu & Tian-Shyr Dai, 2013. "Outperformance Certificates: analysis, pricing, interpretation, and performance," Review of Quantitative Finance and Accounting, Springer, vol. 40(4), pages 691-713, May.
    5. Josef TAUŠER & Radek ČAJKA, 2014. "Weather derivatives and hedging the weather risks," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(7), pages 309-313.
    6. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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