You are working for a large US investment bank and are asked to provide a report for the Head

of the Structured Products team. The first

product is called HSBC Buffered Index Note and the second is called HSBC Buffered Accelerated

Market Participation Security. The head of the team asked you to provide an analysis of these

products, with the aim to understand whether similar products could be offered to your own

clients. The products described are relatively long term, the head of

your team would like you to consider a maturity of at most one year for these products.

a$)$ provide an analysis of the two products using real option market

data. Explain how you would price these products

and justify your answer using real market data for options with approximately one year to

maturity. Discuss the differences $($including advantages and disadvantages$)$ between Black$-$Scholes analysis and the analysis with market data.

b$)$The head of the team also asks to provide ideas of how the HSBC Buffered Index Note

could be adjusted to provide a more attractive investment for clients and be more suitable to

the current market environment. Discuss at least one potential variation of this product that

could be offered to your clients and explain why you think it might be a successful product

c$)$ Also investigate how these products could be offered with individual

equities as the underlying rather than the S&P $500$ index. Explain what your team has to

consider when offering these products for underlyings such as IBM, Microsoft or Tesla.