Structured products

Current issue

3-year USD Range Accrual

A Range Accrual is a structured product that allows investors to receive coupon payments based on the performance of an underlying asset, as long as the underlying asset moves within a defined range.

In this case, the underlying is the SOFR Index (Secured Overnight Financing Rate - SOFRRATE Index), a reference rate published by the Federal Reserve Bank of New York which can be considered as the average interest rate for secured bonds issued in US dollars with a maturity of 1 day. The coupon paid by the product will depend on the time spent by the SOFR index within the range [2.3% - 5.6%] during the 3-year life of the product.

On maturity, investors will receive 100% of their initial capital.

Main features of the product 

*n = number of days the underlying (SOFRRATE Index) remains in the range [2.3% - 5.6%]
N = number of days in a year
(calculation basis 30/360 unadjusted)

Termsheet

KID

For more information or to subscribe to this product, please contact your adviser

A Better Understanding

Definition

A structured product is a debt security that is a combination of several financial instruments. It enables the financial institution that issues it to offer buyers of these products a risk profile that matches their expectations.

A structured product is therefore a security that combines:

• on the one hand, the characteristics of a fixed-income instrument or a short-term deposit;
• and on the other hand, the risk/return characteristics of derivative contracts.

Structured products can be viewed as an alternative to traditional investments, as they enable tailor-made solutions to be found that match the expectations expressed by investors. They are therefore tools adapted to the risk profiles defined by the investor.

The different underlying assets

There are structured products indexed to all asset classes. Structured products offer returns linked to the performance of an underlying benchmark, such as:

• interest rates;
• equities;
• foreign exchange;
• commodities.

If the product offers a return, this return depends on an underlying asset which may be:

• an index (S&P500, NASDAQ, Euro Stoxx 50, etc.),
• an equity/basket of equities – these are referred to as equity structured products,
• the exchange rate of one currency against another – these are known as forex structured products,
• an interest rate benchmark, or even a difference between two interest rates (interest rate structured products).

As Structured Products are created from a combination of financial instruments, they are extremely varied in form and the possibilities for combinations are virtually limitless.

With or without capital protection

Structured products can exist with protection of capital at maturity – this means that the products offer investors the repayment of their initial capital plus high returns if the investor's expectations are fulfilled – or without capital protection.

There are two main categories of structured product:

1/ Growth products: the buyer of the product receives part of the performance of an index at maturity, with or without a capital guarantee.

For instance, the "Participation Note" product gives the capital initially invested plus a percentage of the performance of the S&P500 40 index at maturity.

E.g., if the "Participation Note" offers a 80% participation at the end of 3 years, the product will give the initial capital + 80% of the increase in the S&P500 if that index rises, or the initial capital if the S&P500 has fallen at the end of 3 years.

2/ Yield products: if a predefined scenario occurs, the buyer of the product will receive an income at a given frequency (often annual, sometimes quarterly or even semi-annually), as defined in the structured product's termsheet.

E.g.: a Range Accrual Note-type product – the investor receives a coupon if the underlying interest rate moves within a specified range (e.g. if Euribor 3M is between 1.5% and 4.5%)