Performance of Equity Linked Notes Versus Equity Portfolio
40 Pages Posted: 19 Sep 2015
Date Written: June 13, 2015
Barrier Reverse Convertible structured products have been in huge demand across the globe and are seen as a major part of the overall structured product market. The reverse convertible feature causes the product to deliver worst performing equity in case of a barrier hit event. Otherwise the product delivers regular coupon and complete principal amount at maturity. In this paper we present a simplified framework for investors to view the flipside of the investment and possible losses in the event of delivery of underlyings. We perform the return calculations in specified period window and compare against an equity portfolio investment during the same tenure. We also derive the factors and probabilities of various events which attribute to the performance of the product. We apply the same framework to 200 currently traded products and estimate the profit and losses to investors.
Keywords: ELN, Equity Linked Notes, Structured Notes
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