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A structured product is a single instrument that packages a bond and one or more options to deliver a defined, pre-agreed payoff. Start here.
A structured product is a single investment, usually issued as a note or debenture, whose return is defined by a formula linked to an underlying such as an equity index. Instead of simply rising and falling with the market, it pays according to rules agreed in advance.
Underneath, most structures are built from two ingredients: a bond that provides a base of value, and one or more options that shape the upside and downside. Combining them lets an issuer engineer almost any payoff profile.
The appeal is control over outcomes. You can choose a principal floor, a defined coupon, geared upside, or a profile that pays in flat markets. You decide the trade-off before you invest.
That control has a price. It usually means giving up some upside, accepting lower liquidity, and taking on the credit risk of the issuer.
You are buying a defined relationship between the market and your return.
A structured product is only as good as its term sheet and its issuer. The headline number is the least important part.
Across this Academy we will take apart each building block so the diagrams stop being a mystery.
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.