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Case
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Reference no. UVA-F-1618
Published by: Darden Business Publishing
Originally published in: 2010
Version: 3 May 2010

Abstract

The case is appropriate for use in finance courses but requires knowledge of option pricing, including put-call parity. Students should also have had exposure to the principles of financial engineering. Can be taught as part of a risk-management module in a corporate finance elective also is appropriate for a derivatives course from the standpoint of designing and pricing a financially engineered product. The risk management aspect of the case is conducive to productive discussion regarding the regulation of derivatives as part of the reform of the financial system in reaction to the financial crisis. This case describes a structured note marketed during the aftermath of the financial crisis of 2007-08. The security in this case was an index knock-out note, which had been designed by Credit Suisse for the private banking market. Adopting the viewpoint of a private banking client, students must decide whether they would invest in the note based on its unique risk profile.

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Abstract

The case is appropriate for use in finance courses but requires knowledge of option pricing, including put-call parity. Students should also have had exposure to the principles of financial engineering. Can be taught as part of a risk-management module in a corporate finance elective also is appropriate for a derivatives course from the standpoint of designing and pricing a financially engineered product. The risk management aspect of the case is conducive to productive discussion regarding the regulation of derivatives as part of the reform of the financial system in reaction to the financial crisis. This case describes a structured note marketed during the aftermath of the financial crisis of 2007-08. The security in this case was an index knock-out note, which had been designed by Credit Suisse for the private banking market. Adopting the viewpoint of a private banking client, students must decide whether they would invest in the note based on its unique risk profile.

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