<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Structured products are financial instruments issued by a financial institution where the amount claimed by the investor from the issuer depends on the variation of the price of the underlying instrument based on which the certificate is issued, namely: individual shares, share costs, stock indexes, currencies, commodities or combinations of these according to the prospectus. These products appeared with the development and diversification of financial services during the recent years, as well as due to the emergence of liquidity suppliers of international importance. The liquidity providers have developed on their own platforms a new range of derivatives which are different from the classical derivatives. These new derivatives, similar to contracts for difference (CFDs), have given to other institutions the possibility of transferring their risk more easily, regardless of the nature or type of the underlying asset. Thus, the financial institutions issuing structured financial products have found in liquidity providers the possibility of developing the CFDs required for their risk transfer operations. The issuers of structured products do not accept new risky positions when they issue certificates because they neutralize them through suitable risk transfer operations. The issuing financial institutions structure certificates from a variety of financial assets and/or commodities in order to adjust them to the various risk profiles of investors both in terms of expected return and in terms of the response to risk. Thus, products are issued that quickly respond to the trends of the financial or commodity markets. Investors in structured financial products benefit from the economic effect of a derivative but are exposed to financial risks that are more complex and more difficult to understand and at the same time depend on the reliability and stability of the contractual relationships between various financial institutions.</p></abstract>

Structured products are financial instruments issued by a financial institution where the amount claimed by the investor from the issuer depends on the variation of the price of the underlying instrument based on which the certificate is issued, namely: individual shares, share costs, stock indexes, currencies, commodities or combinations of these according to the prospectus. These products appeared with the development and diversification of financial services during the recent years, as well as due to the emergence of liquidity suppliers of international importance. The liquidity providers have developed on their own platforms a new range of derivatives which are different from the classical derivatives. These new derivatives, similar to contracts for difference (CFDs), have given to other institutions the possibility of transferring their risk more easily, regardless of the nature or type of the underlying asset. Thus, the financial institutions issuing structured financial products have found in liquidity providers the possibility of developing the CFDs required for their risk transfer operations. The issuers of structured products do not accept new risky positions when they issue certificates because they neutralize them through suitable risk transfer operations. The issuing financial institutions structure certificates from a variety of financial assets and/or commodities in order to adjust them to the various risk profiles of investors both in terms of expected return and in terms of the response to risk. Thus, products are issued that quickly respond to the trends of the financial or commodity markets. Investors in structured financial products benefit from the economic effect of a derivative but are exposed to financial risks that are more complex and more difficult to understand and at the same time depend on the reliability and stability of the contractual relationships between various financial institutions.

Opinion on the new financial products issued by financial institutions - structured products

The Bucharest University of Economic Studies

Proceedings of the International Conference on Business Excellence

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Structured products are financial instruments issued by a financial institution where the amount claimed by the investor from the issuer depends on the...

Opinion on the new financial products issued by financial institutions - structured products

Published Online: Aug 26, 2017

Page range: 1 - 8

DOI: https://doi.org/10.1515/picbe-2017-0001

Keywords
hybrid financial products, structured products, certificates, derivative

© 2017 Laurentiu Paul Baranga, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Opinion on the new financial products issued by financial institutions - structured products

Published Online: Aug 26, 2017

Page range: 1 - 8

DOI: https://doi.org/10.1515/picbe-2017-0001

Keywordshybrid financial products, structured products, certificates, derivative

© 2017 Laurentiu Paul Baranga, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
hybrid financial products, structured products, certificates, derivative