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Displaying 10 out of 27 results for "Structured Products".

This is why UBS paid the SEC $15 Million over Reverse Convertible Structured Products

The Securities and Exchange Commission today announced a $15 million settlement with UBS over structured products linked to high volatility stocks today. The SEC press release announcing the settlement and its Order Instituting Proceedings are available on the SEC website. This post explains the underlying notes and why UBS may have paid the SEC a substantial settlement over sales practices related to UBS's reverse convertible notes ("RCNs").

UBS sold thousands of structured notes to retail...

This is Why Merrill Lynch Paid the SEC and FINRA $15 million over Bank of America's VOL Index-linked Structured Products.

The Securities and Exchange Commission yesterday announced a settlement with Merrill Lynch over structured products linked to Bank of America's proprietary investable volatility index based on VIX Future contracts ("VOL Index"). The SEC press release announcing the settlement and its Order Instituting Proceedings are available on the SEC website. The companion FINRA settlement press releaseand AWC are available on the FINRA website. Bank of America published its VOL Index in 2010 and shortly...

Smaller Brokerage Firms Are Even Worse!

Last week we posted Have 1.3% or 7.3% of Stock Brokers Engaged in Misconduct? explaining that the competing estimates of broker misconduct differ because of differences in their definition of misconduct and the sample of brokers studied.

Firms with 400 to 999 Brokers Are Much Worse Than Larger Firms.

In last week's post, we listed the 100 highest risk brokerage firms with 400 or more registered brokers sorted by the percentage of their brokers associated with Investor Harm Events as of...

Structured Product Based Variable Annuites are Riskier Than Advertised

My colleagues and I have a paper in the current (Winter 2014) Journal of Retirement about structured product based variable annuities (spVAs), which are variable annuities with index-linked accounts that have a payoff similar to structured products. We have been following the market for spVAs since they were first introduced in 2010, and distributed our first working paper in 2011. Since then, three issuers have sold more than $3 billion worth of spVAs, according to a recent article in...

Monte Carlo Simulation, Explained

Valuing products with exotic derivatives can be difficult since these products typically have complex payoff formulas. One of the most flexible methods for valuing such products is called Monte Carlo simulation. At SLCG, we use Monte Carlo simulation in a lot of our work, so we thought it would be helpful to explain a bit about it and show how it can be used to estimate the future returns of an asset.

The basic idea behind Monte Carlo simulation is to determine the statistical properties...

Structured CD with an Exotic Embedded Option

In the past few months, we have constructed a database of thousands of structured certificates of deposit (CDs). We have analyzed and evaluated hundreds of these CDs and have compiled these results into a recently completed study . Our results indicate that structured CDs are usually issued at significant discounts to face-value (comparable to structured products), offer little if any market exposure and are often less valuable than contemporaneously issued fixed rate CDs.

We've recently come...

Similar Structured Product Premia in US and Europe

One point we've made again and again in our research is that structured products -- debt securities with market-contingent payoffs -- tend to be priced at a premium to face value. We have documented premia in reverse convertibles, autocallables, absolute return barrier notes, principal-protected notes, dual directionals, and over 17,000 individual products freely available in our searchable structured product database.

Recently, the SEC has required structured product issuers to disclose an...

Structured Investments Linked to Proprietary Indices

Structured products are often linked to well known indices like the S&P 500 or the Dow Jones Industrial Average, but recently it has become more and more common for banks to issue structured investments linked to proprietary indices that they create themselves. The use of proprietary indices (also known as 'self-indexing') has begun to arouse suspicion from various sources and so we thought we'd take a step back and talk about the issue for a moment.

Structured products linked to well-known...

Reverse Convertibles and Event Risk

Reverse convertibles are short-term debt securities issued by banks whose return of principal at maturity is contingent upon the returns of the linked stock. Although these notes typically pay relatively high coupons, they expose investors to losses on the underlying asset, especially if those losses are beyond the trigger level. Academic research shows that these coupons are not adequately compensating the investor for the market risk that they are bearing by investing in the notes. For...

Evolution of Absolute Return Structured Products

From 2006 to 2009, a type of structured product known as an absolute return barrier note (ARBN) was issued by a variety of major investment banks. ARBNs are interesting because they are linked to the absolute value of the return on an underlying, not just its return, and therefore are considered non-directional bets. We've done a lot of work on ARBNs here at SLCG, including a research paper that values a sample of ARBNs and finds they are worth on average 4.5% less than their purchase price...

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