AEX-Sparen

Bachelor thesis (2011)

Contributors

C.W. Oosterlee (mentor)
G.F. Ridderbos (mentor)
Programme
Technische Wiskunde (EEMCS) (TU Delft)
Copyright: © 2011 Van der Aa, J.J.R.J.P.
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Published Date

26-05-2011

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Programme

Technische Wiskunde

Abstract

Certain banks offer its customers a new investment product, which is known as AEX-sparen. A minimal amount of 5000 Euro is put into a bank account and this will be returned after four months plus interest. The interest is the same as the AEX-Index has earned in the previous four months, but is maximized to 10 %. If the AEX-Index has gone down after four months, the initial investment of 5000 Euro will be returned, so the customer is protected against the risk of losing money and has a potential of earning a higher percentage after four months than the (annualized) risk-free rate of 2.5%. It is impossible to predict the stock market with certainty and investments always involve risk. The bank will make advantage of this by guaranteeing the initial investment and still offering a chance to make a nice profit. But who will actually profit more from this, the bank or the customer?