The Most Important Questions on Structured Products
What you need to know
What do I expect the markets to do and what are my needs?
In order to find the right product, you need to have a clear idea of how you view the markets. You also need to know what your requirements and risk profile are.
How does the underlying work?
The amount paid out at the end of the investment period depends not only on the product structure, but also on how the underlying has performed. This means that you need to find out what the features of the underlying are and what development potential it has.
What happens at the end of the investment period?
Structured products set out clearly and precisely the amount paid out at the end of the investment period under different market scenarios. This payoff profile is generally depicted in a payoff diagram or table.
Does the investment period correspond to my investment horizon?
With the exception of open-end products the investment period is generally fixed. This should be compatible with your investment horizon. Ask your client advisor whether and how a structured product can be renewed at the end of the investment period. Moreover, investors in products which have a callable feature should be prepared to accept early redemption of the products.
What are the risks with structured products?
UBS's product classification tells you which of the four risk categories the product has been assigned to, but keep in mind that there are substantial differences within each category. Ask your client advisor what the exact risks of each product are. Experience has shown that investors tend to underestimate the risks of products that offer substantial earnings opportunities.
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