Interest rate, Equity, FX and Commodity linked Structured products : Overview and Performance

Abstract

This paper will introduce common structured products and explain how these products are designed via financial engineering, categorize them and identify their benefits and risks both from the issuer’s as well as from the investor’s perspective. Although this paper concentrates only on a limited number of structured products from an exhausted list of the numerous types of structured products that have been created, yet our intention is to raise investor’s awareness about common structures. Furthermore, we will look into the analysis and the progress so far of the pricing models and methods used for structured products and explain why is difficult to adopt an appropriate pricing model. Thereafter, we will introduce and analyze twelve capital guaranteed structured products, structured upon four different underlying assets. We will specify their characteristics and payoff functions and look into the motivation on each category. Moreover, we will observe the interrelation among each product’s underlying asset summary statistics and the performance of the structured products and finally make some conclusions and comments on these results.