A modeling approach of return and volatility of structured investment products with caps and floors
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| Format: | Artículo científico |
| Language: | en |
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Universidad de Puerto Rico
2024
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| _version_ | 1876455229244833792 |
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| author | Jiaer He |
| author_facet | Jiaer He |
| contents | A modeling approach of return and volatility of structured investment products with caps and floors Jiaer He Roberto Rivera Administración y Contabilidad bond market stock market passive investing Individual retirement accounts Puerto Rico Investment Companies Act A popular investment structured product in Puerto Rico is the stock market-tied Individual Retirement Account (IRA), which offers some stock market growth while protecting the principal. The performance of these retirement strategies has yet to be studied. This work examines the expected return and risk of Puerto Rico stock market IRAs (PRIRAs) and compares their statistical properties with other investment instruments after tax. We propose a parametric modeling approach for structured products and apply it to PRIRAs. Our method first estimates the conditional expected return (and variance) of PRIRA assets from which we extract marginal moments through the Law of Iterated Expectation. Our results indicate that PRIRAs underperform against investing directly in the stock market while carrying substantial risk. PRIRAs may be reasonable for some risk-averse investors due to their principal protection and tax deferral. 2024 artículo científico 1541-8561 https://www.redalyc.org/articulo.oa?id=63178161003 https://www.redalyc.org/journal/631/63178161003/ https://www.redalyc.org/journal/631/63178161003/html/ https://www.redalyc.org/journal/631/63178161003/63178161003.epub https://www.redalyc.org/journal/631/63178161003/movil en http://www.redalyc.org/revista.oa?id=631 Forum Empresarial application/pdf Universidad de Puerto Rico Forum Empresarial (Puerto Rico) Num.2 Vol.28 |
| format | Artículo científico |
| id | redalyc_63178161003 |
| institution | Redalyc |
| language | en |
| publishDate | 2024 |
| publisher | Universidad de Puerto Rico |
| spellingShingle | A modeling approach of return and volatility of structured investment products with caps and floors Jiaer He Administración y Contabilidad bond market stock market passive investing Individual retirement accounts Puerto Rico Investment Companies Act A modeling approach of return and volatility of structured investment products with caps and floors Jiaer He Roberto Rivera Administración y Contabilidad bond market stock market passive investing Individual retirement accounts Puerto Rico Investment Companies Act A popular investment structured product in Puerto Rico is the stock market-tied Individual Retirement Account (IRA), which offers some stock market growth while protecting the principal. The performance of these retirement strategies has yet to be studied. This work examines the expected return and risk of Puerto Rico stock market IRAs (PRIRAs) and compares their statistical properties with other investment instruments after tax. We propose a parametric modeling approach for structured products and apply it to PRIRAs. Our method first estimates the conditional expected return (and variance) of PRIRA assets from which we extract marginal moments through the Law of Iterated Expectation. Our results indicate that PRIRAs underperform against investing directly in the stock market while carrying substantial risk. PRIRAs may be reasonable for some risk-averse investors due to their principal protection and tax deferral. 2024 artículo científico 1541-8561 https://www.redalyc.org/articulo.oa?id=63178161003 https://www.redalyc.org/journal/631/63178161003/ https://www.redalyc.org/journal/631/63178161003/html/ https://www.redalyc.org/journal/631/63178161003/63178161003.epub https://www.redalyc.org/journal/631/63178161003/movil en http://www.redalyc.org/revista.oa?id=631 Forum Empresarial application/pdf Universidad de Puerto Rico Forum Empresarial (Puerto Rico) Num.2 Vol.28 |
| title | A modeling approach of return and volatility of structured investment products with caps and floors |
| topic | Administración y Contabilidad bond market stock market passive investing Individual retirement accounts Puerto Rico Investment Companies Act |
| url | https://www.redalyc.org/articulo.oa?id=63178161003 https://www.redalyc.org/journal/631/63178161003/ https://www.redalyc.org/journal/631/63178161003/html/ https://www.redalyc.org/journal/631/63178161003/63178161003.epub https://www.redalyc.org/journal/631/63178161003/movil |