StructuraWisor by Finwisor · AMFI-Registered Distributor (ARN-166452) · Educational platform, not a solicitation to invest
The risk that gets forgotten. A structured product is a promise, and a promise is only as good as the party making it.
Every payoff diagram assumes the issuer pays. If the issuer defaults, the protection, the coupon and the participation can all become claims in a recovery process rather than money in your account.
Credit risk is therefore a first-order risk in structured products, on a par with market risk.
Read the rating, understand who the issuer is, and check whether anything secures the note. Resist reaching for yield by accepting weaker credit.
Diversify across issuers so that no single name can damage the whole allocation.
A promise is only as good as the party making it.
The party that borrows your money and makes the payoff promise. Every payoff diagram assumes the issuer pays.
The risk that the issuer defaults, so the protection, coupon and participation become claims in a recovery process rather than money in your account. A first-order risk, on a par with market risk.
A note backed by collateral, so it is worth checking whether anything secures the payoff rather than reaching for yield by accepting weaker credit.
This article is educational and does not constitute investment, tax or legal advice, nor a solicitation to invest. Any figures are indicative illustrations of mechanics, not forecasts. Refer to official term sheets and consult a qualified professional before investing.