How HSBC got better at pricing share buy-backs
Monte Carlo approach generates faster, more reliable pricing for complex deals
Corporate share buy-backs are booming in Europe, with volumes more than doubling in recent years. Yet with growth comes complexity. Corporates are increasingly adding bespoke clauses – early execution options, time-varying maturities and floating notionals, to name a few – to their repurchase programmes. Banks now need models that can price more complex buy-back programmes quickly and accurately.
The standard technique for pricing share buy-backs relies on partial differential equations (PDEs)
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