Basics of Structured Products
Structured products are an attractive addition to direct financial investments such as equities, bonds, currencies and commodities. Use these innovative and flexible investment tools to discover new perspectives and appropriate investment solutions, even in difficult market environments.
Most popular structure product types are:
Capital Protection
Capital protection products allow investors to hedge price declines. Capital protection is typically between 90% and 100% of the nominal value of the goods and is applied at maturity. As with bonds, price fluctuations can occur during the period. The upside potential of capital-protected products is generally lower than other products and can be limited. However, investors have the option of generating significant returns without capital protection. In addition to guaranteed repayments, capital-protected products participate in raising the price of the underlying asset.
Reverse Convertible
Reverse Convertible (RC) is based on one or more underlying assets and pays a guaranteed coupon. If the closing price of the underlying asset is above the strike price at maturity, the nominal value will be repaid in full. Otherwise, the lowest performing underlying asset will be delivered at a cost corresponding to the strike price. In this case, this leads to a significant discount compared to the starting level.
Barrier Reverse Convertible
Barrier Reverse Convertible (BRC) is based on one or more underlying assets and pays a guaranteed coupon during that period. At maturity, the nominal value will be fully repaid unless either of the underlying assets touches its barrier (US barrier) or any of the underlying assets closes below that barrier (EU barrier). Otherwise, capital is converted to the specified number of shares of the lowest performing underlying asset (conversion rate) unless all underlying assets exceed the strike price at maturity.
Outperformance Certificate
With an outperformance certificate, investors participate in the performance of the underlying asset. Also, good performance of the underlying asset can be disproportionate. If the price of the underlying asset at maturity is below the starting level, the certificate replicates its performance on a one-to-one basis. However, investors with an outperformance certificate will benefit from a disproportionate price increase if the underlying asset is cited above the starting level. The maximum repayment price for outperformance certificates is not limited. The exact amount of outperformance depends on your participation rate. In return, investors forgo dividends.
Bonus Certificate
The bonus certificate allows you to participate in the performance of the underlying asset. This product participates in unlimited and unlimited performance of the underlying asset and can achieve higher returns compared to investing directly in the underlying asset in slightly negative market conditions. If the barrier is not touched, the investor will receive a) bonus level or b) the positive performance of the underlying asset at maturity, whichever is higher. Bonus level / bonus return eligibility does not expire until you touch the barrier. Bonus certificates correspond to tracker certificates and investors participate 1: 1 in the underlying performance.
Source: SSPA