The increasing use of bespoke indices, also known as custom or proprietary, in structured products across markets is forcing issuers to make assumptions with the use of proxies to hedge their exposures.

Bespoke indices have been around for many years but the persistent low interest rates environment, low credit spreads as well as recent events like the dividend crisis of 2020 have forced issuers of structured products to look at new alternatives. Our contributor, Eric Barthe, continues this week’s expert analysis on the relationship between decrement underlyings and autocallable , and notes that decrement indices are effective underlyings for banks to remove most of the dividend risk and

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