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Mr. Chan invested USD 300,000 in the following Quanto Fixed Coupon Note - Worst of Basket of 2 shares: Ping An Insurance Co-H (2318.HK) and
Mr. Chan invested USD 300,000 in the following Quanto Fixed Coupon Note - Worst of Basket of 2 shares: Ping An Insurance Co-H (2318.HK) and Alibaba Group Holdings (9988.HK) Initial Spot: Ping An Insurance: 88.825 Alibaba Group: 200.80 Strike: 88.97% of Spot Trigger KO Barrier: 100% of Spot Coupon: 12% p.a. Tenor: 6 months Observation: bi-monthly (every 2 months) USD/HKD at maturity: 7.7500 Please Calculate the Return / Outcome based on the following price scenarios: A) Initial Spot Observation 1 Observation 2 Final valuation Ping An Insurance 88.825 88 90 75 Alibaba Group 200.80 205 202 185 B) Initial Spot Observation 1 Observation 2 Final valuation Ping An Insurance 88.825 89 90 88 Alibaba Group 200.80 205 204 203 C) Initial Spot Observation 1 Observation 2 Final valuation Ping An Insurance 88.825 84 82 75 Alibaba Group 200.80 198 190 176 Questions: a) What is the view of investor if he chooses to invest in this product, what are the other possible ways to express similar view? b) What will be the underlying option structure has been embedded? c) What are the main risk factors Mr. Chan has to be aware when investing in this product
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