Structured products

Abstract

The breadth and diversity of asset classes and derivative instruments available to trade in the market over the past few years has been very impressive. The forefront of financial innovation today comes from the ability to offer investors designed financial products to meet specific hedging strategies or investment goals. These products, called structured or hybrid products, combine simple and complex derivatives across asset classes to generate cash flows to suit a particular market or customer need. There is a need to study the various Structured Products available in the International as well as Indian markets and also to understand the Pricing and Hedging Strategies associated with these products. This report aims at understanding and studying the various kinds of structured products that are available in the markets today. Starting with giving a brief introduction about what structured products are and why the need for the same arose, the project moves on to describe in detail the three main types of Structured Products Interest Rate backed, Equity Derivatives Backed and Foreign Currency backed. The report explains in detail the replication and valuation method to be used for determining the valuation of the complex structured products. After having explained about the different types of structured products along with detailed examples about each type, the report moves on to analyse the various structured products that are currently available in Indian markets and the issuers of the same. It details the need for a structured products market in India and how the players have been responding to the ever increasing demand by coming up with innovative and newer products. Having analysed the Indian markets the final part of the report entails an analysis of the structured products that are offered in the international markets. This report concentrates primarily on the structured products that are in vogue currently in the Asian markets. This last section explains in detail the general features of these products and the pricing techniques of these products. The report aims to provide a comprehensive overview of the structured products market and the need for a developed market for structured products in India to answer the burgeoning demand for these hybrid products