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RBC LiONS™ S&P 500 Buffered Protection Securities (USD) Series 4 Analysis Option Pricing Analysis, Issuing Company Riskhedging Analysis, and Recommended Investment Strategy

Jan 2018
Working Paper
17-044
By  Zekuang Tan

This paper will compute the value of the RBC financial derivative-RBC LiONS™ S&P 5 Buffered Protection Securities (USD), Series 4 by utilizing the Black-Scholes Option Pricing Model. In order conduct a thorough analysis of the securities, the paper will compare the model value with the actual price at which the security was issued and the price at which it was traded. This model will help establish a recommended strategy for the issuing company to hedge the liability incurred by the security issued, and provide a possible hedging strategy for the investors.