The dividend divide
European dealers are clashing over the proper way to assess dividend risk in structured equity products. Some dealers say their competitors have it all wrong – and may lose their shirts.
Some of these dealers say the situation resembles the overambitious expansion by a number of European regional banks – typically state-backed – several years ago into the market for cliquet-like options products. These banks botched their volatility models, and while their unrealistic hedge assumptions allowed them to undercut traditional market leaders in pricing, the house of cards collapsed
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