Equity-Linked Saving: A New Product Range for Retail Investors
ISMA Centre Finance Discussion Paper No. 2000-11
39 Pages Posted: 23 Jan 2001
Date Written: November 15, 2000
In this paper we report on a new class of derivative products which we refer to as 'equity-linked savings products' (ELSPs). ELSPs require investors to pay periodic installments in return for a predefined equity-linked payoff at maturity. We discuss the structuring, hedging, pricing and marketing aspects of a variety of ELSPs. We pay particular attention to the case of The Netherlands where ELSPs are currently very popular with an estimated USD 2 billion issued over the last three years. Reverse engineering of a recent issue shows that the profit margins that product providers may be able to achieve on ELSPs are extremely high.
Keywords: Exotic Options, Investments
JEL Classification: G10, G20
Suggested Citation: Suggested Citation