Principles of Financial Engineering, 2nd Edition

CHAPTER 17

Essentials of Structured Product Engineering

1. Introduction

Structured products consist of packaging basic assets such as stocks, bonds, and currencies together with some derivatives. The final product obtained this way will, depending on the product, (1) have an enhanced return or improved credit quality, (2) lower costs of asset-liability management for corporates, (3) build in the views held by the clients, (4) often be principal protected.¹

Households do not like to build their own cars, computers, or refrigerators themselves. They prefer to buy them from the producers who manufacture and assemble them. Every complex product has its own specialists, and it is more cost effective to buy products manufactured by these specialists. ...