What are structured investment products?
Structured investment products are adapted to financial tools with a fixed maturity consisting of a note and a derivative. They usually consist of a bond that protects the principle and possibilities that depend on the performance of the basic asset. However, all conditions can be adapted to suit the investor's risk attitude and financial objectives. Structured investment products
are mainly offered large investment banks with global presence and are easily available to individual investors, especially in Europe and Japan. The main advantages of these investment products are that they provide access to the derivative market with a minimum of fees, requirements for trading volume, or a prerequisite for understanding financing. They can also diversify a portfolio to reduce return volatility.
One attribute of structured investment products that attract clients of the aversion is the protection of the disadvantage provided by their component of bonds. The essential protection be guaranteed by the VLWith supported remarks, such as the federal company insurance company, it supported a certificate of deposits in the United States. The issuer can offer a warranty with more favorable conditions in exchange for a higher financial risk. A risk lover can quite ignore the protection of the principle in favor of potentially higher yields.
The performance of structured investment products is related to the performance of a basic asset such as its own capital, interest rate, commodity or exchange rate. Although no options are actually purchased and sold, the issuer mimics its performance in terms of market perspective and investment goals. The investor may prefer regular interest payments to generate income or due payment to increase capital. The new and foreign markets could be fucking that it may not have the financial influence of the impatient issuer. A more conservative investor can accept a limited possibility toHe further reduced the volatility of his expected return.
For example, a slightly bull investor buys a structured investment product with a principle of principle of $ 1,000 in the US (USD) with a fixed maturity of 5 years and the possibilities for the S&P 500, currently 1000. Another $ 200 is paid for this option. If the S&P 500 ends at a maturity date, then the investor does not receive anything, if it is more than 1500, then receives its principle $ 1000 plus 75% simple valuation in the S&P 500, up to the limit of $ 2000.
In exchange for the protection of its principle, the investor has given up possible revenues by more than $ 2000. It tuned the opportunity to meet its investment goals by reducing the volatility of the expected returns. A risk neutral investor could observe that its expected returns may be higher for traditional tools than in structured investment products.