Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
Structured bonds
Market terminology

Structured bonds: an overview of a financial instrument

30.07.2022
2 min read

What risks structural bonds pose to investors

Structured bonds are a type of securities in which payments are made depending on the fulfillment or non-fulfillment of the conditions of the trading strategy. And in this case, we are talking about various events that affect financial activity. For example, if the price of goods or services has changed, or there is currency instability. In this case, income from structural bonds may not be paid or, conversely, its volume will be higher than previously assumed by the investor. The number of redemption payments may be lower than the face value or the market price.
If there are changes in the prices of bonds on the exchange, then they are considered underlying assets.
Payouts are also affected by changes in interest rates and fluctuations in inflation. Structured bonds act as insurance in the event that state or municipal institutions are unable to meet their obligations.
Banks, brokerage firms, and investment companies issue securities. Bonds are divided into two types – coupon and discount bonds. The first option involves periodic payments in the form of coupons, and in the second case, there is no such option. Discounted bonds cost less than coupon bonds, their price rises depending on how much time remains before their maturity date. This allows the holders of discount-type securities to receive income in the form of the difference in value at purchase and redemption.Structured bonds are a type of securitiesStandard coupon income is paid at a rate of 0.01%, but such payments are not mandatory. The main income here depends on the performance of the listed events – changes in prices, exchange rates, and indices. In addition, the payout is influenced by the participation rate. It shows how much income the investor will receive; the value is calculated on the bond’s growth dynamics. The size of the coefficient is determined at the time of the paper offering on the stock exchange.
Structured bonds can serve as capital protection for their holder. For example, an investor fixes a certain amount that will be returned to him if the market fails to meet the conditions for the payment of income. It can be 80% of the initial investment or another figure.
It should be kept in mind that initially there is no information about what additional income or the amount of paper redemption can be obtained. Therefore, it is impossible to calculate your benefits in advance. Besides, investing in structured bonds, there is a risk of losing money, if at the moment of paper redemption an amount less than the initial value will be returned. There is also a possibility that the bank or company that issued the bonds will be in default and will not be able to pay all obligations. In addition to the above risks, we should not forget about the rise in inflation, which after the pandemic and geopolitical conflicts has affected almost the entire world.

Tags: Market terminology
0
Previous Post Fintech company Bolt Financial made the largest deal in the market Next Post Development history of the Airbnb accommodation booking service

You Might Also Like

junk bonds
Market terminology
Junk bonds: characteristics of securities with low credit ratings
02.02.2021
GMMA
Market terminology
How to use the GMMA indicator for successful market activities
03.05.2024
Support and resistance
Market terminology
What is the support and resistance lines: using the tool
20.09.2021
Forex drawdown
Market terminology
Forex drawdown and why you shouldn’t be afraid of it
22.09.2023
Gartley Butterfly pattern stock
Market terminology
Gartley Butterfly pattern: basic principles of construction
07.01.2023
credit risk
Market terminology
Credit risk: how to assess the probability of loss in advance
14.12.2022

Popular Posts

  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Spain’s economy performs best in the EU
  • Li Ka Shing: How can success be achieved without money and education?

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Press Secretary
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Press Secretary
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Press Secretary
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Press Secretary
16.05.2020

Popular Posts

  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Spain’s economy performs best in the EU
  • Li Ka Shing: How can success be achieved without money and education?
  • Skolkovo analysts: the Russian energy market is suffering losses
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram

© 2024 CHASLAU KONIUKH. ALL RIGHTS RESERVED. Expert in marketing and project management, international investments, financial analyst.

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics