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Hello, long time no hear. Too much on my mind of late, so pretty few posts over the last months. Yet I’ll take a few minutes to write about the latest product we launched together with a large investment bank. It’s a 100% capital guaranteed product in Euro, based on a basket of currencies with a maturity of 2.5 years . The currencies are the Brazilian Real (BRL), the Australian Dollar (AUD), the Norwegian Krone (NOK) and the Canadian Dollar (abbreviated “BANC”), equally weighted against the Euro (EUR). It  doesn’t pay any regular coupon, but at maturity, if the basket has appreciated at least by a single pip (0.01%), then a digital coupon of 16% is paid. In addition, if the basket appreciates by more than 16%, the coupon amounts to 100% of the appreciation. If the basket has depreciated against the Euro, the product doesn’t pay any coupon and redeems at par (100%). Read the rest of this entry »

Libor Linked Deep Barrier Reverse Convertibles are financial products of the yield enhancement category similar to classic barrier reverse convertibles.  In July 2010, investment banks suddenly started to issue these products with a coupon linked to the LIBOR rate (London Inter Bank Offer Rate, the short-term interest rate) and with barriers often set at or below 50% of the current spot price of the underlying index or stock. The maturity was often set at three or four years, far longer than the usual twelve months. Read the rest of this entry »

Foreign Exchange (FX) has one characteristic that other asset classes don’t have: strong trends. With the current unstable macro-economic situation of sovereign countries, notably the whole Euro-bloc, FX trends are stronger than ever. Just consider the EUR/USD FX-rate; it dropped practically straight down from 1.60 to  1.25 in the second half of 2008, rebounded to 1.50 over the next year and dropped back to 1.25 in 2010. Those are huge moves, for major currencies. Read the rest of this entry »

You’d think that with current high volatility and low interest rates, the environment is unfriendly for capital guaranteed products on a stock index? You’d be absolutely right. However, there are means to circumvent these problems and still come up with a structure that has very high chances to yield a good performance while limiting the risk. Read the rest of this entry »

The stocks are falling like snow in  a tempest. Sometimes slowly, but when the wind catches them, they flutter up and down at amazing speeds. More down than up, though; all that erratic movement created by incertitude translates in high volatility in the markets. Another, more technical effect, is the very (near record-high) skew observable in the stock option markets. Since the dividend season has come and gone, there is now but one product type that yields excellent value in such an environment: the yield enhancement products. Read the rest of this entry »

On the 21st of April, a private bank in Switzerland published an advertisement in the NZZ, one of the most read newspapers in the country. In small print below the main message was written in German: “…therefore we do not let ourselves get drawn into speculative transactions and also do not sell structured products.” Boy,  they didn’t get it.

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Lately, I was made aware by a colleague how to improve the short-term outperformance certificate on a high dividend-paying single stock (see my previous entries). Since the stock will fall by the amount of the dividend on the dividend ex-date, an outperformance certificate will not perform well until the stock price has recovered by the amount lost on the dividend pay date. However, setting the strike slightly in the money will circumvent that drawback. Read the rest of this entry »

Here is the one opportunity that no investor should miss: as we approach the stock dividend payment season in Europe, it is possible to construct very attractive bonus certificates with a maturity of only 6 months! Read the rest of this entry »

I am coming back to a previous post, in which I spoke about outperformance certificates. As a reminder, these products use the future (anticipated) dividends of stocks or stock indexes to purchase at-the-money calls in order to create an leveraged upside potential and have no downside protection. I just had an investment bank calculate an example on the Eurostoxx50 Index, and it looked quite attractive. Read the rest of this entry »

Some months ago, I developed the capital guaranteed product with 90% capital guarantee, 90% strike and 9 months maturity. On an underlying asset like the Eurostoxx50 index or the SMI Index, the participation reached 80%. The concept was to find a product that would suit  investors who wanted to profit from the positive market trend while limiting their risk, in a low interest rate and low volatility environment.

Of course, the idea was taken up by investment banks, who devised ways to re-look the original product, making it more attractive to the eye… Read the rest of this entry »