Overview

Principal Protected Market Linked Debentures (PPMLD) are instruments issued with coupons associated with the performance of certain underlying asset, generally an equity index. The Principal portion of the instrument is protected for downside and even in case of any negative return on the underlying equity index, the coupon is not negative. The structure benefits from the positives of debt instrument in form of protection of the principal amount and benefits from positives of equity instrument in form of participation in positive returns. Generally, the instrument do not have periodic payments towards coupons and the coupons are payable only at the maturity of the instrument.

CARE's Valuation of PPMLD structures are opinions on the valuation of a given instrument based on CARE's analysis of the structure and the impact of underlying market variables affecting the structure on the given valuation date. The valuation considers various market scenarios using some of the most advanced simulation software and high quality data on the underlying variables. An independent Valuation opinion provided by CARE helps the investors in taking the right investment decision in the complex PPMLD market. CARE's PPMLD Valuation services may also availed by Issuers for getting an independent third party evaluation of their portfolio.

CARE's Valuation of PPMLD structures are opinions on the valuation of a given instrument based on CARE's analysis of the structure and the impact of underlying market variables affecting the structure on the given valuation date. The valuation considers various market scenarios using some of the most advanced simulation software and high quality data on the underlying variables. An independent Valuation opinion provided by CARE helps the investors in taking the right investment decision in the complex PPMLD market. CARE's PPMLD Valuation services may also availed by Issuers for getting an independent third party evaluation of their portfolio.

Need for Valuations

In view of the fact that PPMLDs are different in their nature and their risk return relationship, SEBI has mandated compulsory valuation of the structures by credit rating agencies like CARE.

Investors are informed with an unbiased independent valuation of the hybrid structure.

Investors, at times, lack the expertise and knowledge to evaluate such hybrid structures, which an independent agency like CARE possesses.

Methodology

We use Local Volatility Method for valuation of structured products using the analytic and simulation capabilities of Numerix Portfolio software.

The valuation methodology adopts a simulation based approach that is accepted across market participants as the appropriate method for valuation of exotic options.

Inputs for the valuation are based on our analysis of information from various data service provider including SuperDerivatives, FIMMDA and Issuers.

Why CARE

Regulatory RecognitionCredit Analysis and Research Ltd (CARE) is recognized by Government of India and all regulatory agencies in India like SEBI, RBI, NABARD, NHB and NSIC.

Independent Opinion - CARE is an independent rating agency promoted by major banks and financial institution in India.

Team Capability - Analyst team of CARE includes qualifies and multifaceted professionals from diverse backgrounds such as chartered financial analysts, chartered accountants, engineers, economists and financial risk managers.

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