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Structured Product Options

Structured Product Options

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Published by vineetksr

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Published by: vineetksr on Jun 22, 2012
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FINA556 – Structured Product and Exotic Options
Topic 1 – Overview of basic structured products1.1 Markets for structured products1.2 Examples of structured notes and equity-linked products1.3 Accumulators1.4 Exotic forms of forward contractsAppendix: Various types of interest rates
1.1 Markets for structured products
What are structured products? 
Financial instruments that are designed to facilitate certain highlycustomized risk-return objectives.
In its simplest form, this can be accomplished by taking a traditionalsecurity, like an investment-grade bond, and replacing the usual pay-ment features with non-traditional payoffs derived, say, from the per-formance of one or more underlying assets or indices (equity-linkedpayoff).
Widely accessible to retail investors in the same way like that of stocks,bonds, exchange-traded funds (ETFs) and mutual funds.
U.S. Securities and Exchange Commission (SEC) Rule 434 
definesstructured securities as“Securities whose cash flow characteristics depend upon one or moreindices or that have embedded forwards or options or securities wherean investor’s investment return and the issuer’s payment obligationsare contingent on, or highly sensitive to, changes in the value of underlying assets, indices, interest rates or cash flows.”

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