Principal Protection using zero coupon bonds and options
Posted: July 31st, 2009, 4:07 pm
Hi, I am currently working on a project which provides principal protection using zero coupon bonds and options. I wonder whether anyone here has the experiences of setting these sorts of things in an Excel environment. An working example in spreadsheet will be very helpful.Basically, at the beginning of the protection term, one purchase zero coupon bonds to mature at tenor in necessary proportion to secure 90% or determined protection level.On a daily basis, one need to adjust the options portfolio to ensure the participation rate (for example, 60%) is met; the primary goal is to keep this rate as constant as possible. Also it will provide a way to lock in gains over a given percentage by purchasing additional zeros from the options proceeds.