On pricing of market-indexed certificates of deposit

A market-indexed certificate of deposit (MICD) entitles its holder, over the chosen length of maturity, to the greater of either a prespecified guaranteed return rate or to a fixed proportion of the increase, if any, on a broad-based stock index between commencement and maturity of the MICD. In the context of a market model for continuous trading we obtain the rational price of the MICD.