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Structured Products Strategies and Theories
Weblog about general topics not related to any specific products
Polish version of the book “How to Invest in Structured Products”
June 15th, 2011 by Andreas BlümkeWspaniała wiadomość! Książka “ Jak inwestować w produkty strukturyzowane” jest teraz dostępny w języku polskim!
Great News! The book “How to Invest in Structured Products” has been translated in polish!
Counterparty risk?
February 1st, 2011 by Andreas BlümkeSince the downfall of Lehman, the structured products industry has been plagued by the problem of the counterparty risk, which denotes the risk associated to the bankruptcy of the issuer an investor is exposed to when investing in a structured product. Indeed, a structured product is a security issued by a bank and as such, it ranks equal to common senior unsecured bonds of the same issuer. If the bank goes belly up, any structured product it issued will fall into the bankruptcy mass and lose most, if not all of its value. So how remote is the issuer risk on YOUR product? how can you judge this risk? Read the rest of this entry »
Some just don’t get it
April 22nd, 2010 by Andreas BlümkeOn 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.
The rise of online trading platforms
November 21st, 2009 by Andreas BlümkeA new structured product needs a certain volume in order for the issuing costs to be covered. The typical size is around one million. Groans across the audience… Who does have one million, be it USD, GBP, EUR or CHF, to invest in one single product? If you want to maintain a certain diversification in your portfolio by limiting the position size to 5%, you have to belong to the super-rich, the so-called Ultra-High-Net-Worth-Individuals with 20 millions of assets, to be able to ask your banker to structure a product that fits your needs. Well, not anymore. Read the rest of this entry »
Structured Products on the dock II
November 10th, 2009 by Andreas BlümkeEvery now and then, while having a conversation with persons who do not work in the banking industry, the topic of the discussion focuses on the subject that define my profession: structured products. Some reactions are quite extreme: ‘evil products’ and ‘dangerous things’ are just two of the many negative descriptions I heard in the recent past. Read the rest of this entry »
Structured products on the dock
October 27th, 2009 by Andreas BlümkeDuring a round-table about the policies of French banks during and after the credit crisis, a lawyer specializing in legal cases in which investors have lost money on structured products exhorted investors to „flee and run like the wind when you hear product names like ‚Athena’, ‘Himalaya’, ‘Phoenix’ etc. “. Further in the discussion, the lawyer did his utmost to discredit structured products in general. I don’t subscribe to his point of view.
Trade barriers
August 9th, 2009 by Andreas BlümkeDisclaimers + sales restrictions = trade barriers
On the right side of the homepage of this website is a menu with many issuer links. Each link redirects you to the homepage of an issuer. What do you see first? A DISCLAIMER! And all too often, a choice of countries with the request to select your country of origin. If you ever read all the small-printed stuff (often over 100 lines of text), were you all the wiser? I wasn’t. In fact, I never read it. Given, I’m a product specialist, so I should know. But I am sure that no investor will get any information in the text that will help him or her choose the product that is right for his/her risk profile. Read the rest of this entry »
Who needs structured products?
August 8th, 2009 by Andreas BlümkeThe ideal portfolio structure
It has ever been difficult to find out how the ideal structure of the portfolio of an investor, be he of private or institutional nature, should look like. Very few investors actually know about the shape of the expected return distribution they really prefer. Many sophisticated questionnaires aim to determine the risk / return profile of the investor. However, these two values are not sufficient to give a complete representation. A risk / return profile typically assumes that with higher risk, an investor may expect a higher return, but also that the losses could be higher. Hence, the classical categorization of investors assumes a normal distribution of returns.
But what if, for example, an investor would like to keep the chance of higher returns while limiting his risk? Such return distributions with classic investments like equities or bonds are extremely rare, and yet investors often ask for it. Advisers are often quite helpless in such situations.
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