Master thesis structured products finance

Background Lack of knowledge and high transaction costs makes it difficult for private investors to follow the investment strategies that structured products offer.

They can be considered as a second generation of OECs with a conditional capital protection feature. We examine three different structured products.

Main reason of this development is; structured products are attracting the retail investors with their advantages. No dividends or coupons are paid by the underlying asset Markets are liquid enough to buy or sell any amount of stock or options anytime. Rainbow options are usually calls or puts on the best or worst of n underlying assets, or options which pay the best or worst of n assets.

Main advantages provided by structured products to their investors are; Higher return: Depending on the risk level of a structured product, it is possible to have a higher return than traditional bonds or deposits by investing in a structured product.

Structured notes primer

Traditional instruments cannot offer features that structured products can. As can be seen from Figure 3. Payoff profile of a structured product can be obtained by the combinations of the payoff profiles of its components. Put Warrants A put warrant is an instrument which gives its holder the right but not the obligation to sell a certain underlying asset at a fixed price mostly called strike or exercise price , in a certain quantity, till a certain date expiry date. According to them the product life cycle is found to be an important pricing parameter for the secondary market. Majority of the structured products in the UK were capital protected products and it was in the year that sales of income products took a significant share of the market. This makes the analysis more complex. The use of gearing to provide high levels of income but with limited risk capital was a key development. The products are not managed by colead managers as they are smaller banks. Three hybrid instruments are selected.

The main difference between products with exotic characteristics is that they contain an exotic option rather than j]ust a standard one that makes the pricing for these instruments complex. For corresponding bonds the coupon typically exceeds the market interest rate.

flow vs structured products

The theoretical part presented a structural model to evaluate discount certificates that took into account the risk of issuer defaulting. Diversification: The ability to customize a variety of assumptions into one instrument is one of the principle attractions of structured products for retail investors because that provides attractive diversification properties to the investors Lamb Evolution of Structured Products Structured products became popular in the U.

structured products returns

The structured products that have no capital guarantee give the investors a prospect to attain an attractive maximum return, but have no guarantee that the capital would be paid back to them.

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Structured Products