Hi All,Hope everyone is doing great. I am new to this forum and has been wondering about this structured product lately. I am hoping some of you might have anexperience to help me out.I came across this product, Accelerated Growth on FTSE, which pays 230% of INdex returns if index rises than initiail level, and if there is fall in Index, your Payoff falls 1% to 1%.You can find it here, http://www.structuredretailproducts.com ... b38e4d24fI am not being able to find out how exactly one would structure the options/futures to create this payoff. Does anyone have any idea?

Please don't post the same request multiple times in different subfora.

Zero of notional 100 + 2.3 ATM Calls - ATM Put + Margin = Issue Price

In the document it mentions averaging so it won't be as simple as K times call - put where K = 2.3it's 2.3 x Asian ATM Call - Asian ATM Put.

Interesting. So the product is really for 5 years, but averaging is only last one year. Can you tell me why would issuer do that? Is that structured such so that he does not have to worry about fluctuating delta in last year? (I assume averaging would bring down gamma).

yes.....greeks are smooth because of averaging. in short term gamma can cause problems...especially if the spot is hovering around strike at expiry. generally called asian tail structures.

So, how would you price Asian Tail structure.Because, I assume the first four years are vanilla call/put and then it becomes Asian at the end. Could you give me some insights on Pricing/Risk management of it?

Typically asianing isn't done so much to smooth the greeks as to make the option cheaper.Pricing -> monte carlo, FD methods (search for Vecer) or approximations (most simple ones are e.g. Curran and Turnbell-Wakeman).Greeks -> indeed your delta reduces over each fixing. If the option is deep in the money, then at each fixing date, your current delta will roughly decrease by 1/(1+remaining number of fixings after this fixing) percent. If spot is around your strike, then things will depend a lot where the forward is as well as where any previous fixings were. It's easy to think through some limiting cases for yourself there.

well..adding a barrier would also make the option more cheaper but greeks might be a nightmare...for instance Up&Out Call

Sure, but having smoother greeks is not the criterium on which people decide what to issue. There are tons of structured notes with barriers in them as well.

Do you have any reference to article on how to price Asian option (or Asian Tail structure) using Monte Carlo?Thanks