What Drives Financial Innovation? A Look into the European Retail Structured Products Market

2012 ◽  
Author(s):  
Claire Celerier ◽  
Boris Vallee
Keyword(s):  
Financial Innovation ◽  
Structured Products ◽  
Retail Structured Products

Providers and distributors: responsibilities regarding retail structured products

2008 ◽  
Vol 9 (1) ◽  
pp. 18-23
Author(s):  
David Rouch ◽  
Joanna Benjamin ◽  
Michael Raffan ◽  
Mark Kalderon ◽  
Simon Orton
Keyword(s):  
Structured Products ◽  
Retail Structured Products

scholarly journals Are Issuer Margins Fairly Stated? Evidence from the Issuer Estimated Value for Retail Structured Products

Forecasting ◽  
2020 ◽  
Vol 2 (4) ◽  
pp. 387-409
Author(s):  
Janis Bauer ◽  
Holger Fink ◽  
Eva Stoller
Keyword(s):  
Product Information ◽  
Fair Value ◽  
Future Research ◽  
Information Sheet ◽  
Gross Margin ◽  
Structured Products ◽  
Retail Investors ◽  
Product Valuation ◽  
Good Guide ◽  
Retail Structured Products

From 2014 to 2018, issuers of retail structured products in Germany established and calculated the Issuer Estimated Value (IEV), a fair value designed to offer more transparency for retail investors. By reporting the IEV in the product information sheet, banks implicitly make a statement on their expected gross margin and, as one of the first papers, we provide an empirical study of the fairness of these disclosed figures. On a sample of discount and capped bonus certificates, we find that reported issuer margins can be verified using standard option pricing models and we illustrate that hedging costs take on an important role for structured product valuation. Consequently, the answer to the raised question in the title seems to be an (initial) ‘yes’ for our chosen product sample. Even though in 2018 the IEV calculations have been replaced by similar margin and cost statements due to the newly introduced Packaged Retail and Insurance-based Investment Products Regulation, this finding might still be a good guide for future research.

Implied risk aversion: an alternative rating system for retail structured products

2019 ◽  
Vol 22 (3) ◽  
pp. 357-387 ◽  
Author(s):  
H. Fink ◽  
S. Geissel ◽  
J. Sass ◽  
F. T. Seifried
Keyword(s):  
Risk Aversion ◽  
Rating System ◽  
Structured Products ◽  
Retail Structured Products

Pre-trade hedging: Evidence from the issuance of retail structured products

2020 ◽  
Vol 137 (1) ◽  
pp. 108-128 ◽  
Author(s):  
Brian J. Henderson ◽  
Neil D. Pearson ◽  
Li Wang
Keyword(s):  
Structured Products ◽  
Retail Structured Products

Catering to Investors Through Security Design: Headline Rate and Complexity*

2017 ◽  
Vol 132 (3) ◽  
pp. 1469-1508 ◽  
Author(s):  
Claire Célérier ◽  
Boris Vallée
Keyword(s):  
Interest Rates ◽  
Cross Section ◽  
Text Analysis ◽  
Security Design ◽  
Case Scenario ◽  
Large Market ◽  
Structured Products ◽  
Financial Products ◽  
High Return ◽  
Retail Structured Products

Abstract This study investigates how banks design financial products to cater to yield-seeking investors. We focus on a large market of investment products targeted exclusively at households: retail structured products. These products typically offer a high return under their best-case scenario—the headline rate—that is nested in a complex payoff formula. Using a text analysis of the payoff formulas of the 55,000 products issued in Europe from 2002 to 2010, we measure product headline rates, complexity, and risk. Over this period, product headline rates depart from the prevailing interest rates as the latter decrease, complexity increases, and risky products become more common. In the cross section, the headline rate of a product is positively correlated with its level of complexity and risk. Higher headline rate, more complex, and riskier products appear more profitable to the banks distributing them. Our results suggest that financial complexity is a by-product of banks catering to yield-seeking investors. 

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