Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 1: Structured Products - Coggle Diagram
Chapter 1: Structured Products
Product that combines traditional
investments and derivatives
Wrappers
Structured Deposits
issued by banks
considered investment products
Advantages :+1:
lower admin costs as bank does
structuring and distribution
guaranteed return of capital
Disadvantages :-1:
lower returns
Structured Notes
unsecured debenture of the issuer
Advantages :+1:
High flexibility
Disadvantages :-1:
Unsecured creditors in
event of liquidation
Higher admin costs
Structured Funds
Collective Investment Schemes
Disadvantages :-1:
Higher admin cost
Advantages :+1:
Greater transparency
due to trust structure
Trustee acts in best interests
of investors
Structured ILPs
Disadvantages :-1:
Higher cost as insurers
outsource structuring
Benefits
Access to exotic asset classes
usually unavailable to retail investors
Risks
Difficulties in pricing
Efficient Risk Management
Yield Enhancement
Discount Certificate
Sold at discount of
underlying shares
Price rises :fire:
above cap-strike
at maturity
Cash settlement
equal to cap-strike paid
Price drops :droplet:
below cap-strike
at maturity
Underlying shares received
Reverse Convertible Bond
Combines a
bond
and
written put option
if price of underlying stock falls below
kick-in level
stock is bought
Costs & Benefits
Higher yields
Unlimited downside loss
Participation Products
Airbag Certificate
Similar to bonus certificates
No sudden drop in payoff
Payoff below barrier level is consistently
higher than underlying asset price
Tracker Certificate
Tracks performance of
underlying assets
May not have maturity date
Bonus Certificate
Payoff at maturity is at least bonus
unless price drops below
barrier level
Price drops below barrier level
anytime before maturity
Value of underlying assets
paid out at maturity
Knock out
occurs
Sudden drop off in payoffs
Price does not cross barrier level
Minimum payout of bonus
at maturity
Disparities
Rights
Suitability