Category

Products

Structured products are the innovative and flexible combination of a classic investment (such as a bond or share) together with a derivative. The wide variety of about 32,000 products is broken down by the SSPA into five main categories.

Categorization

The SSPA categorization model consists of three hierarchy levels. On the top level the model distinguishes investment products from leveraged products. These two main categories are made up of five product categories on the second level, ranging from low-risk capital protection products to higher-risk leveraged products with knock-out. On the third hierarchy level, each of these five product categories comprises a number of specific product types. These product types illustrate how a single structured product functions by means of its respective payoff diagram. The descriptions also provide information on the investor’s market expectations and product-specific characteristics.

Market expectation

  • Rising underlying
  • Rising volatility
  • Sharply falling underlying possible

Characteristics

  • Minimum redemption at expiry equivalent to the capital protection
  • Capital protection is defined as a percentage of the nominal (e.g. 100%)
  • Capital protection refers to the nominal only, and not to the purchase price
  • Value of the product may fall below the capital protection during its lifetime
  • Participation in underlying price increase above the strike
  • Coupon payment possible

Market expectation

  • Rising underlying
  • Sharply falling underlying possible
  • Underlying is not going to touch or breach the barrier during product lifetime

Characteristics

  • Minimum redemption at expiry equivalent to the capital protection
  • Capital protection is defined as a percentage of the nominal (e.g. 100%)
  • Capital protection refers to the nominal only, and not to the purchase price
  • Value of the product may fall below the capital protection during its lifetime
  • Participation in underlying price increase above the strike
  • Redemption at expiry equivalent to capital protection if upper barrier is breached
  • Possibility of rebate payment once barrier is breached
  • Limited profit opportunity

Market expectation

  • Slightly rising or slightly falling underlying
  • Sharp movements of the underlying possible
  • Underlying will not touch or breach upper or lower

Characteristics

  • Minimum redemption at expiry equivalent to the capital protection
  • Capital protection is defined as a percentage of the nominal (e.g. 100%)
  • Capital protection refers to the nominal only, and not to the purchase price
  • Value of the product may fall below the capital protection during its lifetime
  • Participation in underlying price increase above the strike
  • Redemption at expiry equivalent to capital protection if upper barrier is breached
  • Possibility of rebate payment once barrier is breached
  • Limited profit opportunity

Market expectation

  • Rising underlying
  • Sharply falling underlying possible

Characteristics

  • Minimum redemption at expiry equivalent to the capital protection
  • Capital protection is defined as a percentage of the nominal (e.g. 100%)
  • Capital protection refers to the nominal only, and not to the purchase price
  • Value of the product may fall below the capital protection during its lifetime
  • The coupon amount is dependent on the performance of the underlying
  • Periodic coupon payment is expected
  • Limited profit opportunity

Market expectation

  • Underlying moving sideways or slightly rising
  • Falling volatility

Characteristics

  • Contains a discount compared to the underlying value
  • Limited profit opportunity (cap)
  • If the underlying  is above the strike at maturity, the investor receives the maximum redemption amount (cap)
  • If the Underlying is below the Strike at Maturity: Delivery Underlying and/or Cash Settlement
  • Multiple underlyings (worst of) enable more attractive product conditions, but with higher risk

Market expectation

  • Underlying moving sideways or slightly rising
  • Falling volatility
  • Underlying will not breach barrier during product lifetime

Characteristics

  • Contains a discount compared to the underlying value
  • Limited profit opportunity (cap)
  • If the underlying is above the strike at maturity or if the barrier has not been touched, the investor receives the maximum redemption amount (cap)
  • When touching the barrier, the product becomes a Discount Certificate (1200)
  • Due to the barrier, the probability of a maximum repayment is higher, but the discount is lower than for a discount certificate (1200) with otherwise identical product conditions
  • Multiple underlyings (worst of) enable more attractive product conditions, but with higher risk

Market expectation

  • Underlying moving sideways or slightly rising
  • Falling volatility

Characteristics

  • The coupon is being paid regardless of the performance of the underlying
  • Limited profit opportunity (cap)
  • If the underlying  is above the strike  at maturity, the coupon is repaid together with the nominal value
  • If the underlying is below the Strike at Maturity: Delivery Underlying and/or Cash Settlement plus Coupon
  • Multiple underlyings (worst of) enable more attractive product conditions, but with higher risk

Market expectation

  • Underlying moving sideways or slightly rising
  • Falling volatility
  • Underlying will not breach barrier during product lifetime

Characteristics

  • The coupon is being paid regardless of the performance of the underlying instrument
  • Limited profit opportunity (cap)
  • If the underlying  is above the strike at maturity or if the barrier has not been touched, the investor receives the maximum redemption amount (cap)
  • When touching the barrier the product becomes a Reverse Convertible (1220)
  • Due to the barrier, the probability of a maximum repayment is higher, but the coupon is lower than for a reverse convertible (1220) with otherwise identical product conditions
  • Multiple underlyings (worst of) enable more attractive product conditions, but with higher risk

Market expectation

  • Underlying moving sideways or slightly rising
  • Falling volatility

Characteristics

  • Coupon payment depends on conditions
  • Limited profit opportunity
  • Usually equipped with an autocall trigger: If the underlying is quoted above the autocall trigger on the observation date, the nominal amount plus any coupon is repaid early
  • Multiple underlyings (worst of) enable more attractive product conditions, but with higher risk

Market expectation

  • Underlying moving sideways or slightly rising
  • Falling volatility
  • Underlying will not breach barrier during product lifetime

Characteristics

  • Coupon payment depends on conditions
  • Limited profit opportunity
  • Usually equipped with an autocall trigger: If the underlying is quoted above the autocall trigger on the observation date, the nominal amount plus any coupon is repaid early
  • Touching the barrier results in an underlying delivery and/or cash settlement
  • Due to the barrier, the probability of a maximum repayment is higher, but the conditional coupon is lower than for an Express Certificate without barrier (1255) with otherwise identical product conditions
  • Multiple underlyings (worst of) enable more attractive product conditions, but with higher risk

Market expectation

  • Rising underlying

Characteristics

  • Participation in performance of the underlying
  • Reflects underlying price moves 1:1 (adjusted by conversion ratio and any related fees)
  • Underlying can be managed dynamically

Market expectation

  • Rising underlying
  • Rising volatility

Characteristics

  • Participation in performance of the underlying
  • Disproportionate participation (outperformance) in positive performance above the strike
  • Reflects underlying price moves 1:1 when below the strike

Market expectation

  • Underlying moving sideways or rising
  • Underlying will not breach barrier during product lifetime

Characteristics

  • Participation in performance of the underlying
  • Minimum redemption is equal to the nominal provided the barrier has not been breached
  • If the barrier is breached, the product changes into a Tracker Certificate
  • With greater risk, multiple underlyings (worst-of) allow for a higher bonus level or lower barrier

Market expectation

  • Rising underlying
  • Underlying will not breach barrier during product lifetime

Characteristics

  • Participation in performance of the underlying
  • Disproportionate participation (outperformance) in positive performance above the strike
  • Minimum redemption is equal to the nominal provided the barrier has not been breached
  • If the barrier is breached, the product changes into a Outperformance Certificate
  • With greater risk, multiple underlyings (worst-of) allow for a higher bonus level or lower barrier

Market expectation

  • Underlying moving sideways or rising
  • Underlying will not breach barrier during product lifetime

Characteristics

  • Participation in performance of the underlying
  • Profits possible with rising and falling underlying
  • Falling underlying price converts into profit up to the barrier
  • Minimum redemption is equal to the nominal provided the barrier has not been breached
  • If the barrier is breached, the product changes into a Tracker Certificate
  • With higher risk levels, multiple underlyings (worst-of) allow for a higher bonus level or lower barrier

A credit linked note falls into the asset class of credit derivatives or structured products and is therefore also referred to as a synthetic corporate bond, which makes the credit risk of a selected debtor “investable”. The investor acts as an insurer for which it receives a periodic premium (coupon payment). In return, the investor bears the risk of a credit event which, if it occurs, can jeopardize further coupon payments and the repayment of all or part of the principal. The solvency of the reference debtor is therefore decisive. In contrast to an equity investment, repayment is not affected by market volatility or the influence of bad news – as long as no credit event occurs.

For investment products with additional credit risk, third-party bonds (corporate or government bonds) with similar maturities are used. This additional risk enables the issuer to offer more favorable terms. At the same time, the investor is thus given the opportunity to spread the default risk among various debtors (diversification). Compared to other product categories, it is particularly important to observe not only the performance of the underlying instrument but also the creditworthiness of the reference debtor. An investment in such products is recommended if premature default of the reference debtor is considered extremely unlikely.

For investment products with additional credit risk, third-party bonds (corporate or government bonds) with similar maturities are used. This additional risk enables the issuer to offer more favorable terms. At the same time, the investor is thus given the opportunity to spread the default risk among various debtors (diversification). Compared to other product categories, it is particularly important to observe not only the performance of the underlying instrument but also the creditworthiness of the reference debtor. An investment in such products is recommended if premature default of the reference debtor is considered extremely unlikely.

For investment products with additional credit risk, third-party bonds (corporate or government bonds) with similar maturities are used. This additional risk enables the issuer to offer more favorable terms. At the same time, the investor is thus given the opportunity to spread the default risk among various debtors (diversification). Compared to other product categories, it is particularly important to observe not only the performance of the underlying instrument but also the creditworthiness of the reference debtor. An investment in such products is recommended if premature default of the reference debtor is considered extremely unlikely.

Market expectation

  • Warrant (Call): Rising underlying, rising volatility
  • Warrant (Put): Falling underlying, rising volatility

Characteristics

  • Small investment generating a leveraged performance relative to the underlying
  • Increased risk of total loss (limited to initial investment)
  • Suitable for speculation or hedging
  • Daily loss of time value (increases as product expiry approaches)
  • Continuous monitoring required

Market expectation

  • Spread Warrant (Bull): Rising underlying
  • Spread Warrant (Bear): Falling underlying

Characteristics

  • Small investment generating a leveraged performance relative to the underlying
  • Increased risk of total loss (limited to initial investment)
  • Daily loss of time value (increases as product expiry approaches)
  • Continuous monitoring required
  • Limited profit potential (cap)

Market expectation

  • Knock-Out (Call): Rising underlying
  • Knock-Out (Put): Falling underlying

Characteristics

  • Small investment generating a leveraged performance relative to the underlying
  • Increased risk of total loss (limited to initial investment)
  • Suitable for speculation or hedging
  • Continuous monitoring required
  • Immediately expires worthless if the barrier is breached during product lifetime
  • Minor influence of volatility and marginal loss of time value

Market expectation

  • Mini-Future (Long): Rising underlying
  • Mini-Future (Short): Falling underlying

Characteristics

  • Small investment generating a leveraged performance relative to the underlying
  • Increased risk of total loss (limited to initial investment)
  • Suitable for speculation or hedging
  • Continuous monitoring required
  • A residual value is redeemed following a Stop-Loss Event
  • No influence of volatility

Market expectation

  • Long: Rising underlying
  • Short: Falling underlying

Characteristics

  • Small investment generating a leveraged performance relative to the underlying
  • Increased risk of total loss (limited to initial investment)
  • A potential stop loss and/or adjustment mechanism prevents the value of the product from becoming negative
  • Frequent shifts in direction of the price of the underlying have a negative effect on the product performance
  • Resetting on a regular basis ensures a constant leverage
  • Continuous monitoring required

Summary Risk Indicator (SRI)

The Summary Risk Indicator (SRI) is a standardised risk indicator that takes into account both the volatility of a financial instrument (market risk) and the creditworthiness of the issuer (credit risk). Based on this combination, the financial instrument is then classified on a seven-point scale, with 1 representing the lowest risk and 7 the highest risk.
PRIIP providers use the following format for presentation of the Summary Risk Indicator (SRI) in the Key Information Document (KID). As shown below, the relevant figure is highlighted to indicate the SRI of the PRIIP.

1
2
3
4
5
6
7

Lower Risk

Higher Risk

This risk indicator is based on the assumption that you will hold the product (for x years / until [date] [if there is no specific maturity date]).
(Where applicable:) If you liquidate an investment prematurely, the actual risk may significantly differ from that indicated and you may get back less than you invested.
(If classified as illiquid:) (It is [not] possible [under certain circumstances] to liquidate an investment prematurely.) If an investment is liquidated prematurely, you will / may incur significant additional costs. (If classified as associated with significant liquidity risk:) It may be that you cannot readily sell (terminate) your product without having to sell (terminate) it at a price that significantly reduces the amount you get back.

Swiss Derivative Map©

What is the Swiss Derivative Map©?

The product types as defined by the Association are listed in easy-to-understand form on the Swiss Derivative Map©. The map, produced in cooperation with Payoff.ch (Derivative Partners) and SIX Swiss Exchange, is available free of charge as a folder or poster. You agree to allow our partners which enable the free-of-charge order, to have access to your contact details, which they may use for information purposes.

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Please mail the Swiss Derivative Map© to the following address, free of charge:

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Product Finder

Guidelines

  • Important adjustments to the SSPA categorization model as of January 2021

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  • FINSA Q&A

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  • Recommendations for Actively Managed Certificates (AMC)

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  • Guidelines for calculating and disclosing the costs of structured products

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  • Explanatory notes for the SSPA’s ‘Guidelines for calculating and disclosing the costs of structured products’

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Current subscription products

An overview of selected structured products from leading issuers is set out below. Before making an investment decision, you should inform yourself of the terms and conditions, issue price, repayment terms, risks and any fees.

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Issuer Creditworthiness

10.09.2020
Issuer creditworthness of SSPA members
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Legally, structured products are bonds (claims), so the default risk of these securities (the same as for bond issues) depends on the creditworthiness of the issuer or provider of security. This is the reason that issuers’ or security providers’ credit ratings should influence structured product choices.

The SSPA regularly publishes the credit ratings of its association members. The list is sorted alphabetically according to the organisational units (issuing vehicles) of the issuers that issue the structured products. In addition, credit spreads and core capital ratios (Tier 1 ratings) allow further indications of the creditworthiness of issuers and are described in summary form below. The relevant information is available from the respective issuing houses.

Credit ratings refer to the issuer, or provider of security in the case that claims against the issuer are covered by a guarantee or other security, such as letter of responsibility or keep-well agreements. In the latter case, the nature of the security is also stated. This information, together with a structured product’s term sheet, allows investors to quickly and simply determine liable parties and the extent of their liability.

Credit Ratings

Credit ratings refer to the respective provider of the guarantee. In principle this is the group’s parent company (special cases are described). Individual credit ratings by Moody’s, S&P and Fitch are shown separately. The rating agencies have not assessed all issuers.

Credit Spreads

Credit spreads help investors to obtain a better understanding of an issuer’s or security provider’s creditworthiness. The information refers to corporate bonds of one-year and five-year duration respectively. The base points listed represent the investor’s hypothetical insurance premium to cover against the default of the issuer’s structured products. Credit spreads provide more accurate and current creditworthiness information on issuers. A small spread typically indicates high creditworthiness.

Core Capital Ratio (tier 1 ratings)

The «tier 1» core capital ratio (according to Basel II) is the ratio of core capital and risk-weighted credit amounts. The core capital is made up of the share capital, disclosed reserves and profit carried forward. Equity requirements according to Basel II require a minimum tier 1 rating of 4%.

Important

Please note that issuers’ rating, credit spread and core capital ratio are only three of several criteria influencing the choice of a structured product. The information below should not be considered investment advice, nor does it constitute an offer or recommendation to buy or sell a product or take the place of a person-to-person consultation. Rather than investing in a single product, we recommend diversification. This prevents a single product in an investment portfolio from gaining too much weight, and in cases of default having too great an effect on the portfolio’s overall value.

The SSPA and the issuers listed are in no way responsible for the completeness or accuracy of the information. No special verification procedures were performed.

Investment Checklist

Before investing in structured products, investors must be able to answer the following questions:

  • What market expectations do you have, both generally and with regard to individual underlying securities?
  • Do you know the underlying security? Have you been following its recent performance?
  • Do you know how the underlying security will need to perform for the product to generate a profit?
  • Are you familiar with the market scenarios that can result in a loss?
  • Do you know the issuer of the product and have you been informed of the issuer risk?
  • Does the product correspond to your risk appetite?
  • Have you taken note of all sources of information relating to the product?

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