Pricing and issuance dependencies in structured financial product portfolios

Matthias Pelster and Andrea Schertler

Journal of Futures Markets, 2019, vol. 39, issue 3, 342-365

Abstract: We exploit a unique sample of structured financial products (SFPs) to analyze pricing and issuance dependencies among different types of such market‐linked investment vehicles. Our study provides evidence of cross‐pricing between products with complementary payoff profiles. Such dependencies may be explained by issuers’ efforts to generate order flow for products that supplement their current SFP risk exposure. Additionally, we observe issuance patterns in line with the argument that issuers exploit the complementarity payout profiles when bringing SFPs to market. Our study emphasizes cross‐pricing from a perspective not previously considered in the literature.

Date: 2019
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