Structured products with derivatives from "summary" of FINANCIAL DERIVATIVES by S. S. S. KUMAR
Structured products with derivatives are financial instruments that combine derivatives and other assets to create unique investment opportunities. They can offer features such as protection against market fluctuations, potential to generate higher returns, and customisation to meet specific investment goals.- Structured products are much more complex products of finance that combine different assets, derivatives, and other financial instruments into a sophisticated whole.
- Options, futures and swaps are all forms of derivatives so certain structured products may include one or more of these instruments.
- Many investments involve some kind of derivative instrument in order to maximize returns or decrease overall portfolio risk.
- These products can be used to execute hedging strategies, increase return or reduce risk, but they come with increased complexity and risks.
- Structured product issuance isn't subject to the same level of regulations as traditional ones, and reportedly, lack of awareness among their purchasers plays a significant role.
- Investors should have the proper understanding of derivatives markets and exercise due diligence before using structured products due to their complexity and potential risks.
- Proper pricing and analysis of structured products require a good understanding of underlying assets, together with keeping up-to-date with the latest data and market events.
