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Market index depository liabilities: Analysis, interpretation, and performance

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Abstract

This paper examines a new financial instrument, the market index CD. This deposit offers an interest rate equal to a specified fraction of the change in the stock market over the life of the CD with a guaranteed minimum. We present a pricing formula, an examination of the effects of underlying variables, an evaluation of the early redemption feature, empirical results on the historical performance, and a discussion of some issues suggested by the introduction of this product.

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Authors and Affiliations

  1. Department of Finance, Insurance and Business Law The R. B. Pamplin College of Business, Virginia Polytechnic Institute & State University, USA

    Don M. Chance & John B. Broughton

Authors
  1. Don M. Chance
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  2. John B. Broughton
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Chance, D.M., Broughton, J.B. Market index depository liabilities: Analysis, interpretation, and performance. J Finan Serv Res 1, 335–352 (1988). https://doi.org/10.1007/BF00235203

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  • DOI: https://doi.org/10.1007/BF00235203

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