Trading Strategies Within a Low Interest Rates Environment

In this work, we propose to construct a trading strategy and simulate its future payoffs in the order to study its behavior within a low-interest rate environment. Indeed, today interest rates are historically low and investors tend to take more risks for yield enhancement. Before constructing the strategy, we explain the basic option strategies of the markets, as they are the main yield enhancement components of almost all strategies. Then we expand the different aspects of structured products and, more precisely, Autocallable (AC: Auto callable) products. In the order to understand the pricing models implemented, the proposed study explains the Black-Scoles Model and the Monte Carlo pricing method. The objective of this study is to investigate the field of the trading strategies within the context of low-interest rates. A genuine AC strategy was constructed from scratch, and the results are quite intriguing. To realize that, we had to implement our AC strategy on python and analyze the results. We conclude that, while the price is attractive, the strategy is highly sensitive to the interest rate when getting low and represents many risks.