A structured product is legally a debt security of an issuer. In the case of insolvency, such a principle is equally with all other obligations of the Issuer. In a bankruptcy case, this could result in a total loss for the investor. The creditworthiness of the issuer is usually indicated on the term sheet. On the website of the Swiss Structured Products Association (SSPA), the credit ratings are published.
Zürcher Kantonalbank issues structured products as Zürcher Kantonalbank, Zurich or Zürcher Kantonalbank Finance (Guernsey) Limited, Guernsey. Zürcher Kantonalbank, Zurich has the government guarantee of the Canton of Zurich and the following ratings: Standard & Poor's AAA, Moody's Aaa, Fitch AAA.
Zürcher Kantonalbank Finance (Guernsey) Limited, Guernsey is a 100 percent subsidiary of the Zürcher Kantonalbank, Zurich. The liabilities of Zürcher Kantonalbank Finance (Guernsey) Limited, Guernsey are ensured by a keep-well agreement with Zürcher Kantonalbank, Zurich.
Under the terms of the Keep-Well Agreement, Zürcher Kantonalbank undertakes to hold all outstanding voting shares in Zürcher Kantonalbank Finance (Guernsey) Limited and not to dispose of these equity securities as long as obligations from financial transactions exist. In addition, Zürcher Kantonalbank has agreed to provide sufficient funds to enable Zürcher Kantonalbank Finance (Guernsey) Limited to meet its payment obligations from financial transactions. However, the Keep-Well Agreement does not constitute a guarantee and therefore does not give rise to any direct claims by the creditors of Zürcher Kantonalbank Finance (Guernsey) Limited against Zürcher Kantonalbank.
Structured products are suitable for all investors. Decisive is the right use for the expected market movement of the underlying. Risk-averse investors prefer solutions with capital protection, while yield-oriented investors invest in products with yield optimization. Participation products are suitable for investors who expect a rising or falling underlying.
Structured products offer investors for all risk profiles and for every market scenario an appropriate repayment profile. It can thus not only generate good returns in rising markets, but also in declining or sideways-moving markets. The risk in structured products may be selectively controlled.
Products with the same design are of course comparable. When compared the product issuer risk parameters also should be considered. So should a capital protection product issued by an issuer with lower credit quality offer better rates in form of a higher capital protection level, a higher participation rate or a lower exercise price, as the buyer of the product bears the credit risk of the issuer.
Basically, exists an information for structured products (so called term sheet). This also includes information on the functioning and taxation of a product along with the security number, duration and terms. In additon there are also general electronic product declarations (StruktiFit) and brochures published by Zürcher Kantonalbank. The term sheet and other information are shown under "Publications" of the individual products. For most structured products Zürcher Kantonalbank creates a monthly status report.
Customers of Zürcher Kantonalbank can subscribe structured products of Zürcher Kantonalbank without any brokerage fees. For more information, please contact your local bank.
Structured products are liquid investment instruments in general and can be bought or sold during the normal trading hours at any time. Most of the products are listed on the stock exchange and can also be handled via online banking tools. Non-listed products are traded via phone. Zürcher Kantonalbank aims to offer, under normal market conditions, at any time during the term a liquid secondary market.
All ZKB Barrier Reverse Convertibles listed on the stock exchange are traded flat accrued interest, i.e. including the accrued interest ("dirty"). The relevant details can be found on the term sheet under "Key Elements of the Products".
All information always refers at maturity. During the term the price quotation of the structured product is dependent on various parameters such as volatility, interest and dividends.
The TER (Total Expense Ratio) at structured products of Zürcher Kantonalbank is calculated by analogy with the TER of funds to facilitate the comparability of costs. Production costs (administration, legal, infrastructure, etc.) and distribution costs are considered in the TER. The TER is expressed as a percentage of the nominal. By the TER of structured products thus a direct comparison can be made with funds.
The tax treatment of structured products depends on the product type and maturity. On the term sheet of a structured product of Zürcher Kantonalbank, you will find the section "Taxes". There will be referred to the tax treatment for private investors domiciled in Switzerland. In addition to income and withholding tax, the Federal turnover tax may apply in the secondary market.
During the term of the structured product, the price of a product depends on the development of options and their parameters contained in the structure. A payoff diagram, however, is the payout structure at maturity from a graph.
The presentation is always of the underlying instrument. The Payoff chart shows visually, from which level a structured product brings a higher return than direct investment or the maximum and the minimum repayment amount (can be zero). The vertical axis shows the profit / loss of the structured product depending on the price of the underlying, the horizontal axis represents the price of the underlying. With yield enhancement products the maximum return is limited by a horizontal product line (neutral runs above the 0 line). With participation products the maximum return is not limited, and the product line is as the underlying or even steeper. With capital protection products the level of capital protection is indicated by a vertical product line at or below the 0 line.
The repayment of the structured product is done automatically by the Issuer. This is based on the specified redemption method indicated on the term sheet. Depending on the structure, it may be a delivery of the underlying asset or a cash repayment. A total loss cannot be excluded. Graphically, the redemption method is shown in the payoff diagram.
If, after a knock-in event, a delivery of an underlying (e.g. Barrier Reverse Convertibles) occurs, the number of shares delivered depends on the particular Ratio (Ratio). Since no delivery of, for example 6.5 Shares may take place, the investor will receive a delivery of 6 shares and a cash payment to the value of 0.5 Shares (fraction). If the investor holds two structured products, this would result in a delivery of a further share from the fraction calculation, however, the fractions cannot be combined. Therefore, the investor receives 12 shares and a cash value of a share (2 * 0.5).
