Stress Testing Short Worst-of Products, Puts, and Long Equity Positions

Summary

The document frames a stress-testing problem for a portfolio exposed to an equity index through short autocallables and other worst-of basket products, short exchange-traded puts, and long underlying holdings. It lists potential risk drivers: falling prices, rising volatility, interest-rate changes, correlation shifts, differences between long- and short-term volatility, and dividend changes. The author asks whether the proposed directional exposures are understood correctly and which historical episodes could represent them.

No response, calculations, scenario dates, or portfolio sensitivities are provided. The listed effects are hypotheses to check, not established conclusions; structured-product exposures can depend on payoff terms, barriers, maturity, and the state of the underlying assets. The note is useful as a starting checklist for scenario design, but it does not identify historical analogues or quantify the portfolio's losses. A practical analysis would need instrument terms, position sizes, market data, and joint scenarios rather than isolated parameter shocks.

Key ideas

• The portfolio combines short worst-of structured products and puts with long underlying holdings.
• The author identifies price, volatility, rates, correlation, term-structure, and dividend moves as possible stress drivers.
• The document asks whether these exposures are correctly interpreted and which historical scenarios fit them.
• It supplies no answer, quantified sensitivities, or specific historical episodes.

Tags

# Historical stress scenarios for portfolio of short worst-of-basket structured products and short puts?


# Historical stress scenarios for portfolio of short worst-of-basket structured products and short puts?












I'm looking for historical scenarios for stress testing considering a portfolio of SMI Index based instruments, particularly short structured products (predominantly autcallables and non-callable worst-of-basket products), short put options (EUREX) and long underlying positions.

As far as i understand these parameters seem to have a considerable impact on my portfolio:

- Drop in underlying prices (Puts are exercised prematurely)

- Increase in vola (puts nicrease in value, with short we are losing)

- Lower interest rates (holding costs of options increase)

- Increase in correlation (we are short correlation(?))

- Negative correlation

- Lower long-term vola and increased short-term vola

- Lower dividends (we are long dividends (?)

My first question: Is my understanding of the impact of changes in parameters correct? Second question: Which historical scenario relates to these points above?

Thank you in advance Yours Thomas

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.