On pricing of market-indexed certificates of deposit

Joseph C. Gardiner and Shlomo Levental

Statistics & Probability Letters, 1989, vol. 8, issue 4, 329-334

Abstract: A market-indexed certificate of deposit (MICD) entitles its holder, over the chosen length of maturity, to the greater of either a prespecified guaranteed return rate or to a fixed proportion of the increase, if any, on a broad-based stock index between commencement and maturity of the MICD. In the context of a market model for continuous trading we obtain the rational price of the MICD.

Keywords: arbitrage; pricing; contingent; claim; Ito's; formula; martingale; trading; strategy (search for similar items in EconPapers)
Date: 1989
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