Notice of RetractionDerivative Pricing of Knock Out Discount Accumulator

Notice of Retraction

After careful and considered review of the content of this paper by a duly constituted expert committee, this paper has been found to be in violation of IEEE\´s Publication Principles.

We hereby retract the content of this paper. Reasonable effort should be made to remove all past references to this paper.

The presenting author of this paper has the option to appeal this decision by contacting TPII@ieee.org.

This paper does the researches on the a kind of high-risk financial derivatives named knock out discount accumulator, which is causing enormous losses to the investors under the bearish market, especially under the impact of this global financial crisis. As KODA is a "hybrid" instrument with complex structure, many investors don\´t fully understand its feathers and potential risks, much less pricing this kind of financial derivatives. This paper prices KODA by using building blocks of financial engineering analysis or called replica method as well as martingale approaches. The basic idea of building blocks approach is to treat a single KODA contract as a portfolio of several common derivatives, so pricing KODA can be converted to adding the initial value of each common derivative. On one hand, this method can be used to price asset, on the other hand it could help to understand the characteristics of KODA product. Meanwhile, asset pricing method based on martingale theories is under the equivalent martingale measure, so that the present values of financial derivatives are the conditional expectations of the discount of future returns.