Thou shalt buy ‘simple’ structured products only

Structured appear to offer good value in two situations. The first is when you can sell them with an attractive margin, such that the payoff provided at the end of the investment horizon T>0 is hedged, and not of your concern. This method of value creation is possible for banks and financial planners but is not really in reach of retail customers. The second possibility consists of purchasing these instruments and making sufficiently high investment returns with them. In this note we claim that one must be extremely careful when one is on the buyer’s side; the odds may go against you, transforming a potential cash cow into a loss generator.