The evolving art of pricing cliquets

Cliquet options are widely traded and embedded in many retail structured products. But they are hard to value and some dealers claim their rivals are mis-pricing them. Navroz Patel reports on the debate and some initiatives that may help

Products with embedded cliquet options such as Accumulators and Predators are an established part of the European retail structured equities market. Cliquets have been traded for around a decade, though their pricing has always been contentious. But some dealers’ concerns have now reached a crescendo, with established players questioning the risk management of some of the less-experienced dealers that have entered the market during the past 12 months. “It appears that cliquet call spreads