SRP in brief: Greeks in focus – looking at options risk

With the launch of the SRP Greeks solution approaching, FVC’s Tim Mortimer dived deep into the various risk characteristics that the option positions in structured products are exposed to.

In this article and others to follow Mortimer considers some of the main ‘Greeks’, namely Delta, Gamma, Vega, Theta, Vanna and Charm.

According to Mortimer, Greeks provide two important pieces of information that are closely related: the hedging that a trader is required to undertake to manage the risk of derivatives or structured products, and the likely changes in the valuation of an option or structured product when market parameters move.

This product offers a balance between a traditional fixed income investment and a direct investment in the stock market - Marcel Pronk, VLK

Dutch independent wealth manager Van Lanschot Kempen collaborated with BNP Paribas for a capital-protected product that is a mix between a fixed income investment and a traditional index-linked structure.

The five-year note provides annual income while at maturity its return is linked to a weighted basket comprising the S&P 500 (80%) and Eurostoxx 50 (20%) indices.

“This product offers a balance between a traditional fixed income investment and a direct investment in the stock market,” Marcel Pronk, director treasury sales, structured products & FX, told SRP.

Malaysia’s Affin Hwang Investment Bank listed the country’s first commodity futures-linked structured warrant as the bank leverages the new underlying asset to target retail investors.

Listed on the Bursa Malaysia on 17 January, the first batch consisted of one call, and one put European-style cash-settled structured warrant tracking the Malaysian ringgit-denominated crude palm oil futures. More than 22 million units were traded on the inaugural day of trading, according to Encik Nurjesmi Mohd Nashir, CEO at Affin Hwang.

In an exclusive interview, Mehdi Rayane, vice president financial products sales at Marex Solutions in the United Arab Emirates, highlighted the three aspects of his job that helped him to grow into his role at the non-banking issuer of structured products: the technical expertise around products and various formats; the company’s client-centric approach; and the need for cross-selling within the organisation.

“I have always been particularly intrigued by the tailor-made nature of structured products, which led me to pursue a career in this field,” said Rayane who was the recipient of the SRP-Derivia Intelligence Middle East Personality of the Year 2024 award.

Actively managed certificates (AMCs) were discussed by Rico Blaser, CEO of Swiss fintech vestr, who noted that despite the lack of public data, there is evidence of the AMC market's growth from multiple perspectives.

The primary driver of this growth, he said, is technological advancements and automation provided by platforms like vestr, which have significantly reduced the costs and operational risks associated with AMCs.

“These advancements have made it financially viable to launch AMCs with as little as US$1 million in assets under management, and in some cases, even smaller amounts,” he told SRP.

In people news, Barclays hired former Goldman Sachs equity derivatives (EQD) veteran Paul Johnson as head of equities for Asia Pacific. He is tasked with leading the equities franchise in the region with a focus on equity derivatives, equity-linked financing, electronic trading and oversight of prime. Based in Hong Kong SAR, Johnson will report functionally to Scott McDavid, global head of equities, and regionally to Jaideep Khanna, CEO of Barclays, Apac and head of markets, Apac.

Meanwhile, Citigroup recruited Michael Boas from Macquarie Group to boost its strategic equity solutions team within the markets division based in Hong Kong SAR.

The UK market ended 2024 somewhat on a downer, with an estimated £90m (US$109m) collected from 53 publicly offered structured products in December – only June 2024 saw lower monthly sales and issuance figures (£80m from 47 products).

SRP also published market reviews for Germany and Finland. The latter saw nine active distributors in Q4 2024 of which the top three – OP Ryhmä, Nordea, and Alexandria – captured a combined market share of 96%.

In China, the gold spot price traded against the US dollar (XAU/USD) continued to dominate retail structured deposits while FX rates also remained the dominant asset class in the Czech Republic, ahead of interest rates and equity baskets.

Finally, more than 40% of German retail investors plan to invest more in structured products during 2025, according to a survey conducted by the German Bundesverband für Strukturierte Wertpapiere (BSW).

_{Image: Artem/Adobe Stock.}

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