SLCG Research: Structured Product Based Variable Annuities
(Sep 2013)
In 2010, AXA Equitable began issuing a new kind of variable annuity that, in addition to traditional mutual fund-like subaccounts, also included an option for a structured product-like crediting formula linked to an underlying index such as the S&P 500. Our firm had done a lot of work on both structured products and variable annuities, so in late 2011 we started analyzing the structured product embedded in AXA's product, eventually writing a short research paper on the subject which we...
SLCG Research: Structured Certificates of Deposit
(Jul 2013)
Lately, we've been fascinated by structured certificates of deposit (CDs), also known as 'market-linked CDs', 'equity-linked CDs', 'market contingent CDs', etc. Structured CDs are bank deposits that have interest payments linked to market indexes, individual stocks, commodities, or any other underlying asset. Unlike structured products, which have public SEC disclosure documents, structured CDs are not well studied and even the size of the market is not perfectly clear. We covered the basics...
Update on Apple-Linked Structured Products
(May 2013)
A few months ago, SLCG issued a working paper that studied the decline in value of Apple-linked structured products. Jason Zweig of the Wall Street Journal also wrote a piece about these findings, most notably that Apple's stock price decline had serious repercussions in the structured product market. Apple's stock price has continued to fall and we recently updated the paper to show how this decline is still affecting investors in structured products.*
Since reaching $700 in September of...
SLCG Research: Dual Directional Structured Products [Update]
(Jan 2013)
We have significantly updated our working paper on dual directional structured products (or simply dual directionals). Since our first version of the paper, our work has been covered by RISK.net and in November of 2012 RISK.net named a dual directional as their trade of the month. The latest version of the paper is available from the SLCG website and SSRN.
In this version of the paper, we expanded our scope by studying all dual directionals registered with the SEC since 2008. We divide dual...
SLCG Research: Dual Directional Structured Products
(May 2012)
Earlier this month, SLCG released a new research paper that values Dual Directional Structured Products (DDSPs). DDSPs are debt securities that feature payoffs very much like a long straddle position on the underlying asset for small price movements -- the investor realizes gains if the underlying asset increases or decreases in price (the origin of the term 'dual directional') within a certain range during the term of the note.
DDSPs differ from a conventional straddle position in a number...
SLCG Research: Non-Traded REITs
(Mar 2012)
We've posted a new working paper on our website that brings together much of our research related to non-traded Real Estate Investment Trusts (REITs). In it, we discuss the history and structure of non-traded REITs as well as differences between non-traded REITs and other avenues for gaining exposure to real estate. We highlight the dizzying array of fees and conflicts of interest embedded in these companies. We demonstrate that non-traded REITs are often misleadingly valued, heavily...
SLCG Research: Reverse Convertibles and Stochastic Volatility
(Feb 2012)
We've talked a lot about structured products -- and reverse convertibles in particular -- on this blog. In this blog post we discuss reverse convertibles in more detail and present some results found in a new research paper my colleagues and I have just completed.
Reverse convertible notes -- or simply "reverse convertibles" -- are structured products whose payoff at maturity is dependent upon the return of an underlying asset or security during the tenor of the note. If the underlying asset...
SLCG Research: Modeling Autocallable Structured Products
(Mar 2011)
SLCG released today 'Modeling Autocallable Structured Products'.
A callable structured product is a note that is callable by the issuer. The note is linked to an underlying asset, or 'reference asset.' If the reference asset reaches the call price during the term of the note, the note is called and note holder receives a pre-specified return. If the reference asset never reaches the call price during the term of the note, the note is never called and the note holder simple receives the...
SLCG Research: Principal Protected Notes
(Jul 2010)
SLCG released today 'The Anatomy of Principal Protected Absolute Return Notes'.
Structured products are debt securities that often have unconventional and complex payoff structures. Their payoffs are often linked to a security or index, such as the S&P 500 or the Russell 2000, with asset classes ranging from equity, commodities, currencies and debt. A Principal Protected Absolute Return Barrier Note (ARBN) is one structured product that returns the absolute value of the return of the...
SLCG Research: Reverse Convertibles
(Jun 2010)
SLCG released today 'What TiVo and J.P. Morgan teach us about Reverse Convertibles'.
Structured products are debt securities that often have unconventional and complex payoff structures. Their payoffs are often linked to a security or index, such as the S&P 500 or the Russell 2000, with asset classes ranging from equity, commodities, currencies to debt. A reverse convertible note is an equity-linked structured product. It is a short-term note that pays a relatively high coupon rate...
