Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation

Yuhang Jiang

doi:10.47297/wspdecWSP2515-797317.20261003

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Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation

10卷第3期

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Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation
Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation
Wuhan University, Wuhan, Hubei, 430072, China
2026年10卷第3期页码：93-98
纸质出版：2026-03-30
DOI：10.47297/wspdecWSP2515-797317.20261003
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Yuhang Jiang. (2026). Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation. 发展经济学, 10(3), 93-98.

Jiang Yuhang.Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation[J].Development Economics of China,2026,10(03):93-98.
Yuhang Jiang. (2026). Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation. 发展经济学, 10(3), 93-98. DOI： 10.47297/wspdecWSP2515-797317.20261003.

Jiang Yuhang.Dynamic Optimization of Autocallable Product Trigger Mechanisms: A Distributionally Robust MDP Approach with Chinese Market Validation[J].Development Economics of China,2026,10(03):93-98. DOI： 10.47297/wspdecWSP2515-797317.20261003.

摘要

Abstract

Snowball products

also known as autocallable structured notes

have grown rapidly in China

but their fixed knock-in and knock-out thresholds often fail under market stress. This paper proposes a dynamic optimization framework that integrates distributionally robust optimization (DRO) with Markov decision processes (MDP) to adapt thresholds to market volatility

skewness

liquidity

and tail risk. It also develops a layered Delta-Gamma-Vega hedging strategy suitable for China's less liquid options market. Using Monte Carlo simulations and historical backtesting on Chinese market data from 2018 to 2024

the study compares fixed-threshold

rule-based dynamic

and DRO-MDP designs. The DRO-MDP approach reduces conditional value-at-risk (CVaR) by 28%

increases the Sharpe ratio by 55%

and keeps the additional hedging cost below 0.5 percentage points. The results provide practical implications for structured-product designers

risk managers

and regulators.

关键词

Keywords

references

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