What are Structured Products?

Structured products are innovative, flexible investment instruments and an attractive alternative to direct financial investments such as shares, bonds, currencies and the like. They are sufficiently flexible to accommodate any risk profile, no matter how challenging the markets. Basically, structured products are bearer bonds with the issuer liable to the extent of all his assets. Thus, structured product quality is directly linked to the debtor’s, or issuer’s, creditworthiness. Bearer bonds (bonds and structured products) are subject to issuer risk. In case of issuer bankruptcy, traditional bonds as well as structured products form part of assets under bankruptcy law. To keep issuer risk to a minimum, investors should stick to top-quality issuers, and spread their investments among several issuers. Diversification is, of course, a wise strategy for all forms of investment including time deposits, bonds and structured products. Issuer creditworthiness over time should also be monitored.

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