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Stuctured Products: Your blog writer featured in SMARTINVESTOR Magazine
I wrote a small contribution to the SMARTINVESTOR magazine on structured products. A hot topic these days as the Lehman Brothers Minibonds saga left many burned. Since these products are made out of a combination of products, the true risk is often hidden, even to the most savvy investors… One of the reasons that these products are so obscure lies in the fact that there is no standard structured product, each product is different with many possible underlying markets linked to it. So, what is a structured product? The concept is fairly simple, but the outcome is not. A structured product is a financial product combining a note (or bond) and a derivative (an option such as a call or a put option). A good example goes as follows: The investor buys a bond paying an annual interest of 5%The investor sells the annual interest pay-outs to buy a call option on the Straits Times Index (STI) with a well-defined maturity date The investor will therefore have a bond with a potential
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