Over the last two weeks, most large stock indices have swung dangerously close to a bear market with drops reminiscent of the so-called Black Monday crash of 1987. In this article, we look at the effects of the crash on the structured products market.

After last week’s crash, thousands of autocallable products in South Korea linked to the main market cap indices such as the Eurostoxx 50 and the Nikkei 225 reached what is known as peak vega level. This means most issuers of autocallables face increasing hedging cost and potential losses.  “In terms of hedging, most of it was in Apac - Nikkei and HSCI long date vol levels, and also Eurostoxx 50 long dated, which is where the biggest exposures are,” an investment banker t

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