NC11025 Contingent Claim Valuation Contingent claim valuation – The case of Phnix Certificates Rodrigo Hernández Radford University & University of Arkansas Christopher Tobler Stetson University & University of Arkansas Lynn Saubert Radford University ABSTRACT This paper introduces a new financial product named Phnix Certificates and provides detailed descriptions of the product specifications. It shows that the payoff of a Phnix Certificate can be duplicated by the combination of a long position in the underlying asset and down & in call options on the underlying asset. A pricing formula is developed to price the certificates. A certificate issued by HSBC Trinkaus & Burkhardt AG is presented as an example to examine how well the model fits empirical data. Finally, a detailed survey of the €69 million Phnix Certificates market for 34 issues outstanding on December 2010 issued by HSBC Trinkaus & Burkhardt AG is presented and the profitability in the primary market is examined. The results show that issuing Phnix Certificates is a profitable business and the results are in line with previous studies pricing other structured products. Moreover, the question of whether structured products with exotic options (e.g. Phnix Certificates) are mispriced more than structured products with plain vanilla options (e.g. Outperformance Certificates) is tested. The result shows no statistically significant difference. Keywords: Phnix Certificates; Outperformance Certificates; option pricing; structured products; financial innovation