Structured Products

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Privately Profitable but Socially Useless – An argument against many Structured Products

In his great book “Between Debt and the Devil“, Adair Turner writes In fact financial markets when left to free-market forces, can generate activity that is privately profitable but not socially useful. There can be too much finance, too much trading, and too much  market completition. and numerous studies have shown that much active asset management adds no additional value but does add significant cost, compared with passive index-linked strategies…

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Conduct Problems in Advertising Structured Products in Switzerland

In connection with my recent series of posts highlighting ads by Credit Suisse (Ad 1, Ad 2), Vontobel (Ad 3), Deutsche Bank, Notenstein (Raiffeisen) (Ad 4) pushing structured products such as barrier reverse convertibles, bonus certificates, it was interesting to read this comment from the UK’s Financial Conduct Authority: Clive Adamson, director of supervision at the regulator, said: “It is particularly important in this sector that advertisements for financial products…


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Bonus Certificate CH0239961847 – Advertising on Swiss Newspaper Websites

The latest in the Credit Suisse series of ads for structured products (complex products). The two screenshots below are what you would see just above the headlines on the newspaper website: Who are bonus certificates for? Market Expectation Underlying moving sideways or rising Underlying will not breach barrier during product lifetime 23996184_termsheet_EN   If no Barrier Event has occurred, a cash amount equal to the Denomination multiplied by the greater of (a)…


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Non-Ethical Behaviour in Advertising Structured Products

I came across this ad (see below) in the Frankfurter Allgemeine Zeitung today. Vontobel pushing equity linked bonds aka reverse convertible bonds (Aktienanleihen) with coupons of 7% to 8.5%. Most people, who have no advisor protecting their interests, will base their investment decision on the information given in this ad. In this case there is no visual or written information regarding the risk (except the general risk of loss if the…


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Credit Suisse – Barrier Reverse Convertibles

Advertising on the website of NZZ.ch for the Barrier Reverse Convertibles of Credit suisse on Danone, L’Oréal and Sanofi in EURO: Further information taken from website of Credit Suisse (the flash banner, of which I took screenshots, above linked to it) This is my graphical way of showing this product:   “If the value of the Underlyings decreases, the Final Redemption Amount may be substantially lower than the Issue Price….



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Structured Products and their Importance to Universal Banks’ Profits

The data below is from a large universal bank in Switzerland. It shows that close to a quarter of the entire banks trading profits come from structured products. The fact they make 300% more money with structured products vs equity trading and equity derivatives tells you a lot about margins and how widespread the use of structured products has become. From a client perspective investing in these instruments this can’t…


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Equity Linked Bond / Reverse Convertible Bond

Today, reading the F.A.Z, I came across this ad for equity linked bonds. These kind of products are interesting as they appeal to people’s need or demand for a high guaranteed percentage return. Everyone knows that current interest rates are close to zero, so you get a lot of regular, even university educated people who are attraced to the high yield shown in the ads (and touted with: “chance for attractive…