DESIGN
Indices specially designed for structured products
The dividend rate of the underlying asset is one of the important parameters that impact the characteristics of the structured products: the higher the dividends, the greater the potential returns.
Classic market indices pay variable dividends, which forces issuing banks of structured products to estimate the future dividends of the underlying indices throughout the product's lifetime.
However, this estimation is based on historical performance that sometimes can be unfavorable, which can alter the characteristics of structured products and limit their potential yield.
To address this issue, alternative indices to traditional market indices have been created.
These indices, while remaining closely correlated with market indices, allow for improved potential returns or for the implementation of a protection barrier on the structured products to which they are linked to. This is possible due to mechanisms such as setting a stable dividend rate paid by the index. These indices carry a higher risk for investors in comparison to traditional underlying assets.
Impact of the decrement and volatility control mechanisms
Impact of the decrement mechanism
The price of a decrement index is calculated by reinvesting the dividends paid on the equities that comprise the index and by subtracting a flat-rate constant deduction, the level of which is fixed at the time of design. If the dividends paid out are lower than the fixed deduction, the performance of the index will be lower than that of a traditional index. As a result, a product linked to a decrement index incurs a greater risk of capital loss compared to its reference asset.
Impact of the volatility control mechanism
The implementation of a volatility control mechanism allows volatility to be kept around a pre-determined level. However, during market downturns, investors may not take full advantage of upside opportunities because they would remain with low exposure to a risky asset even if the current level of volatility has returned to relatively low. Controlling volatility therefore limits the impact of changes in the value of an asset.
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Discover the indices used as underlyings in our structured products
GEOGRAPHIC EXPOSURE
Access targeted market exposures
Exposure to companies located in specific countries, regions or global markets:
• Countries (France, Germany, United States...)
• Regions (Nordic countries, Eurozone, Asia...)
• World
• Transatlantic (United States - Europe...)
• Transpacific (United States - Asia)
SUSTAINABILITY
Access sustainability indices with different levels of ESG integration
• Exposure to a portfolio of stocks selected according to ESG exclusion criteria
• Alignment with regulatory requirements, such as the EU Paris-Aligned Benchmark
• Selection of specific ESG thematics: biodiversity, water management, energy transition, diversity, governance, etc
THEMATIC
Gain exposure to thematic investment trends and sectors
Access an offer that allows you to:
• Take advantage of the structural trends affecting our world today: inflation, technological revolution, sovereignty
• Invest according to one's own convictions (Defence, finance, luxury, tourism, etc.)
For more information
Please contact your usual BNP Paribas representative