The Price-setting Behavior of Banks: An Analysis of Open-end Leverage Certificates on the German Market
Entrop O, Scholz H, Wilkens M (2009)
Publication Language: English
Publication Type: Journal article
Publication year: 2009
Journal
Publisher: Elsevier
Book Volume: 33
Pages Range: 874–882
DOI: 10.1016/j.jbankfin.2008.09.019
Abstract
This paper presents the first analysis of open-end leverage certificates on the German market. The major innovations of these certificates are twofold. First, issuers announce a price-setting formula according to which they are willing to buy and sell the certificates over time. Second, the product’s lifetime is potentially endless. Our main findings are that the price-setting formula is (i) designed to strongly favor the issuer and (ii) is consistent with the main outcome of the ‘life cycle hypothesis’ for structured financial products [Stoimenov, P.A., Wilkens, S., 2005. Are structured products ‘fairly’ priced? An analysis of the German market for equity-linked instruments. Journal of Banking and Finance 29, 2971–2993]. (iii) This holds for different product features and also in the presence of issuers’ credit risk and jump risk in the underlying.
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Germany (DE)How to cite
APA:
Entrop, O., Scholz, H., & Wilkens, M. (2009). The Price-setting Behavior of Banks: An Analysis of Open-end Leverage Certificates on the German Market. Journal of Banking & Finance, 33, 874–882. https://dx.doi.org/10.1016/j.jbankfin.2008.09.019
MLA:
Entrop, Oliver, Hendrik Scholz, and Marco Wilkens. "The Price-setting Behavior of Banks: An Analysis of Open-end Leverage Certificates on the German Market." Journal of Banking & Finance 33 (2009): 874–882.
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