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Structured Products in Wealth Management by Hanspeter Wohlwend, Patrik Rüthemann, Boris Hutter, Steffen Tolle

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CHAPTER 2

Structured Products

Introduction

Along with traditional investments such as stocks and bonds, derivatives constitute the building blocks of structured products. By combining the various instruments, it is possible to develop tailor-made product solutions.

Structured products can generate long-term value only if they are used as part of an integrated investment process. Such an approach differs from simply offering products for sale, to be selected at random by the client. It is notably guided by an investment concept that uses structured products to alter the risk/return profile of a portfolio.

The range of product types is enormous, and often different names are used to refer to the same constructs. This chapter focuses on the three main basic forms: certificates, maximum return products and capital protection products. The derivatives discussed are equity derivatives. In addition to the three basic types, a selection of products developed from these will also be discussed. The chapter finishes with a description of the characteristics of the market for structured products.

What are structured products?

Definition

The meaning of the term “structured products” as it is used in specialist literature is not the same everywhere. This book defines structured products as combinations of derivatives and traditional financial instruments, such as stocks and bonds. The various components are combined into a single financial instrument and securitized. The inclusion of derivative ...

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