What They Are

Structured products are investment instruments that combine traditional assets(like bonds or deposits) with derivatives (like options or swaps) to create a defined risk–return profile. They allow investors to engineer outcomes generating yield, protecting capital, or gaining leveraged exposure all from the same underlying market data.

A structured product is built around a payoff formula, usually of the form:

Examples include:

• Principal-Protected Notes — capital is preserved, but upside is linked to an index or asset.

• Yield-Enhanced Notes — higher fixed income in exchange for conditional downside risk.

• Volatility-Linked Notes — returns tied to realized or implied volatility levels.

In essence, structured products allow investors to define how they want to participate in market movement, not just whether it goes up or down.

Why They Exist

Institutions use structured products to tailor exposure for:

• Risk Control — managing downside or volatility.

• Yield Optimization — enhancing return in low-rate environments.

• Market Access — gaining indirect exposure to specific indices, sectors, or currencies.

The appeal lies in customization every product can be engineered to match a portfolio’s objective.