Structured products are a combination of traditional investments into stocks and bonds with investments in derivatives. A combination of traditional instruments with more innovative ones allows the investors to generate higher return rates. A traditional instrument is meant to protect the capital invested in an investment. A derivative is meant to multiply an income. Creation of asymmetrical payout profiles is possible by using e.g. options. Such financial vehicles are designed to better fit the changing conditions on the financial market. Development of the market of structured instruments is an answer to the changing investor demand. The current low interest rates environment and a simultaneous decrease in attractiveness of bank deposits has motivated individual investors to become interested in structured products, which offer potentially higher return rates. The demand for structured products is also linked to the exposure to risk of those assets, which are not necessarily available to the investors on the base market. Structured products, similarly to other alternative investments, also allow the possibility of diversifying the investment portfolio, thus allow reduction of the investment risk and provide access to various investment structures. Some of these structures also enable tax savings (unit-linked products).
KeywordsStructure Product Return Rate Individual Investor Retail Investor Base Instrument
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