Structured Products have made rapid inroads into Asia. Just five years ago, most banks in the region were offering mainly plain vanilla swaps and FX options to a small number of multinationals in Asia. Five years on, the structured products market looks completely different, having moved way beyond simple derivatives. Clients have more complex demands. They must manage their operational, credit and balance sheet risk, but they may also want greater leverage, or to enhance yields and preserve capital. This is good news for investment banks, financial service providers and financial and legal advisers. Asian corporates are often cash-rich and Asian capital is increasingly mobile. And like most companies, Asian corporates often need professional guidance to help them maneuver the array of competitive areas of structured products such as credit, equity, currencies, interest rate and commodities.
The 2005 edition of the Structured Products Handbook is a highly successful and practical guide for Asian corporates and their representatives to take advantage of new investment opportunities to hedge risk. A selected number of leading investment banks, financial service providers and consultants are being invited to contribute an exclusive chapter to the Handbook.
Reviews by Hindu Business Line
JUST as in the land of the blind, the one-eyed is the king, so too, "in a landscape scarred by low yields, the institutional investor skilled in identifying appropriate derivative, structured or hybrid instruments that enhance returns without raising risk, is a prince among commoners," declares Asiamoney in Structured Products Handbook 2005, distributed by Bharat Book Bureau (www.bharatbook.com)
Along with an increase in the investor base in Asia, there is innovation of products, "engineered in the workshops of the world's banks". Thus, the first essay declares, "Hybrid derivatives come of age," and discusses examples such as of a company entering into "an oil/rate range accrual swap that allows it to be compensated for the current high in fuel prices, and expected rise in interest rates."
Do you know that `autocall' is one of the most popular structures in Asia? "It takes the value from its underlying, which is typically a single stock, index, or the worst performing single stock/index out of a certain basket. These products have automatic call features on pre-prescribed dates."
On the commodity side, the book is of the view that "years of under-investment and increased demand have driven up prices at a fast pace in recent years." No wonder, therefore, "Oil, natural gas, base metals and precious metals are now assets of choice for many portfolio managers seeking to hedge macroeconomic risk, decrease portfolio volatility and enhance returns."
With CDO (collateralised debt obligation) and CPPI (constant proportional portfolio insurance) credit, "investors can better control their allocation of risk between risk of default and sensitivity to a credit spread widening," educates the book.
"Two engines driving CPPI credit performance are the gearing and the decade down guarantee."
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