Cecila Adamsson  presenterar sitt examensarbete

Equity Linked Notes - A comparison of products on the Swedish market

Abstract
	
This thesis concerns Equity Linked Notes (ELNs) on the Swedish
market. The purpose is to investigate whether the ELNs sold by the
main banks (Swedbank, Nordea,  SEB, and Handelsbanken) are cheaper for
the customer than the ones sold by other, smaller companies. There are
two main reasons to make this an interesting thing  to find
out. First, ELNs are popular instruments to invest money in today and
the ELN offers are often given to the public, i.e. small
investors. Those investors do not have the tools to thoroughly analyze
the ELN market to find out what a fair price would be. Further, the
second hand markets for ELNs are not very liquid. Therefore the price
of the ELN is set by the seller rather than as a balanced price based
on how much professional traders are willing to pay for it. This
means that the small investors can not trust that the price indicated
by the market is fair either. Second, Swedish media often claims that
ELNs in general are expensive deals for the customer and in this
context the main banks are often mentioned as sellers. Hereby the
impression might be that the ELNs from the main banks are more
expensive than ELNs  from other sellers.

The contracts from the different sellers have been divided into pairs
with one contract from a main bank and one similar contract from a
smaller seller in each pair.  Under assumption that the implied
volatility for long contracts (3-5 years) changes quite slowly, the
implied volatility from the the contract sold by the main bank has
been backed out and used to find the price of the second contract in
the pair. Finally, this new price has been compared to the one
offered.

The results show an obvious pattern in favor for the main banks. There
is only one contract from the smaller companies that is cheaper than
the similar one from the main  banks. After analyzing the results with
respect to possible sources of error the same pattern is even clearer.