Willingness of Japanese financial institutions to sell put options on the Nikkei Stock Average provides investment banks with the raw material from which to create the security that would allow U.S. investors to bet on the fall of the Japanese stock market. Investment Bank, which aims to create the new product has to decide how to design, produce (hedging), and price options (Nikkei Place orders). Highlights the global nature of new product development in the securities market and provides opportunities for students to critique and key decisions related to the creation of this new product. Students should consider the costs of production, consumer preferences, competitive dynamics, and the prices of substitutes for the new product. "Hide
by Peter Tufano Source: Harvard Business School 16 pages. Publication Date: February 13, 1992. Prod. #: 292113-PDF-ENG
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