Never has there been a greater need to fully understand the investments and allocation choices you are making How to Invest in Structured Products is a one stop shop for asset managers looking to understand and make the right investments in structured products. The overarching theme of the book is one of objectivity, explaining in detail, the strengths and weaknesses of each structure, and why certain structures may be unsuitable for specific parties. The book begins by introducing structured products by way of a basic guide so that readers will be able to understand a payoff graphic, read a termsheet or assess a payoff formula, before moving on to the key asset classes and their peculiarities, and then on to more advanced subjects such as structured products construction and behavior. It then moves on to explain how to avoid important pitfalls in products across all asset classes, pitfalls that have led to huge losses over the past year, including detailed coverage of counterparty risk, the fall of Lehman Brothers and other key aspects of the financial crisis related to structured products. The book is supported by numerous figures, payoff diagrams and tables, and includes a unique questionnaire which enables the reader to define his or her own preferred return distribution and select the best fitting products. Table of Content Goal of this book Who should be interested Content summary Introduction part I Generalities about structured products A definition by analogy Reading a payoff diagram Reading a payoff formula Reading a termsheet The categories of structured products Capital guaranteed products Yield enhancement Participation Behaviour of structured products during their lifetime Main valuation and risk measures Capital Guarantee Yield Enhancement Participation products Common special features of structured products Quanto Options Barrier Options Autocall and callable options Rolling products and products without fixed maturity Conditional and accumulating Coupons Functionality options of structured products Physical or cash delivery with equity-based products Clean price and dirty price Lending values Issue minimum / maximum size and liquidity Funding rates and counterparty / credit risk FX, fixed income and commodity products FX based structures Fixed Income structures Commodity products Recent developments Customized index products Actively managed certificates Introduction Part II Classical theory and structured products The Modern Portfolio Theory The Capital Asset Pricing Model The Efficient Market Hypothesis Classical theory and practice Classical theory and structured products Conclusion Structured solution proposal The investor’s preferred distribution of returns Preferred return distribution process versus classic portfolio management An investor’s utility (value) curve Questionnaire Distribution classes: the distribution of returns cube An analysis of return distributions of structured products Introduction Procedure and data Capital guaranteed products Yield enhancement products Participation products Conclusion: product classification Portfolio construction Process description Considered products Sample Portfolios Final words Appendix A: Glossary of terms Appendix B: Distribution of Returns: an Intuitive Explanation Appendix C: Questionnaire Appendix D: List of Figures Appendix E: List of Tables Appendix F: index information Appendix G: Issuer and Product-Related Websites Bibliography Index
Book Details:
- Author: Andreas Bluemke
- ISBN: 9780470684863
- Year Published: 2009
- Pages: 384
- BISAC: BUS036000, BUSINESS & ECONOMICS/Investments & Securities / General
About the Book and Topic:
Never has there been a greater need to fully understand the investments and allocation choices you are making How to Invest in Structured Products is a one stop shop for asset managers looking to understand and make the right investments in structured products. The overarching theme of the book is one of objectivity, explaining in detail, the strengths and weaknesses of each structure, and why certain structures may be unsuitable for specific parties. The book begins by introducing structured products by way of a basic guide so that readers will be able to understand a payoff graphic, read a termsheet or assess a payoff formula, before moving on to the key asset classes and their peculiarities, and then on to more advanced subjects such as structured products construction and behavior. It then moves on to explain how to avoid important pitfalls in products across all asset classes, pitfalls that have led to huge losses over the past year, including detailed coverage of counterparty risk, the fall of Lehman Brothers and other key aspects of the financial crisis related to structured products. The book is supported by numerous figures, payoff diagrams and tables, and includes a unique questionnaire which enables the reader to define his or her own preferred return distribution and select the best fitting products. Table of Content Goal of this book Who should be interested Content summary Introduction part I Generalities about structured products A definition by analogy Reading a payoff diagram Reading a payoff formula Reading a termsheet The categories of structured products Capital guaranteed products Yield enhancement Participation Behaviour of structured products during their lifetime Main valuation and risk measures Capital Guarantee Yield Enhancement Participation products Common special features of structured products Quanto Options Barrier Options Autocall and callable options Rolling products and products without fixed maturity Conditional and accumulating Coupons Functionality options of structured products Physical or cash delivery with equity-based products Clean price and dirty price Lending values Issue minimum / maximum size and liquidity Funding rates and counterparty / credit risk FX, fixed income and commodity products FX based structures Fixed Income structures Commodity products Recent developments Customized index products Actively managed certificates Introduction Part II Classical theory and structured products The Modern Portfolio Theory The Capital Asset Pricing Model The Efficient Market Hypothesis Classical theory and practice Classical theory and structured products Conclusion Structured solution proposal The investor’s preferred distribution of returns Preferred return distribution process versus classic portfolio management An investor’s utility (value) curve Questionnaire Distribution classes: the distribution of returns cube An analysis of return distributions of structured products Introduction Procedure and data Capital guaranteed products Yield enhancement products Participation products Conclusion: product classification Portfolio construction Process description Considered products Sample Portfolios Final words Appendix A: Glossary of terms Appendix B: Distribution of Returns: an Intuitive Explanation Appendix C: Questionnaire Appendix D: List of Figures Appendix E: List of Tables Appendix F: index information Appendix G: Issuer and Product-Related Websites Bibliography Index
A structured product is a pre-packaged investment strategy based on derivatives, options, indices, commodities, debt issuances, foreign currencies, and to a lesser extent swaps. They are used as an alternative to a direct investment as part of the asset allocation process to reduce risk exposure of a portfolio, or to utilize the current market trend. This makes them unique in that they enable the investor to tailor make a package, suitable for their needs. A host of wealthy investors have put their money into structured products to protect the profits they had made from the bull run. Investors with less risk appetite find these products attractive because they are supposed to be low risk and guarantee the capital. But with banks -the biggest counterparties in such transactions – taking hits in recent months, investors are finding that guarantee may have just been a mirage. Structured products have not gone away, for most investors they are the only way of investing in some asset classes such as commodities – for this reason it is absolutely essential that investors have a much better understanding of just what they are investing in.
MARKET NEED – The current ‘credit crisis’ has exposed the need for highly informed decision making by investors in order to better protect and risk manage their investments. UP TO THE MINUTE FOCUS – addresses structured products in light of the current financial crisis, including material on counterparty risk and Lehman Brothers. AUTHOR PLATFORM – has mailing list of 3500 private bankers which he will use to promote the book.
About the Author
ANDREAS BLÜMKE obtained a degree in economics, option business management, from the HEC University of Lausanne in 1992. He became a Certified International Investment Analyst (CIIA) in 2000. Before starting a banking career, he was a soft-commodity trader from 1992 to 1995, working for Continental Grain in Paris, Toulouse and Hamburg. He began his banking activities at UBS AG in 1996 in Zürich, before he joined Cantrade Privatbank AG in 1997 where he created and built the structured products desk and managed a team of up to 6 people, including an Investment Advisory desk. Cantrade was acquired by Julius Baer AG in 2006. Between 2008 and 2013 he honed both his conceptual, structuring and advisory skills at VP Bank. He is now a Product Specialist at Bank Vontobel in Geneva. He is married with three children, and fluent in French, German and English. Structured products have been his passion for the last 15 years.