Commerzbank has added to the new series Bonus Warrants Cap with a “quanto” feature for Spain’s structured retail market.

The new Bonus Warrants Cap Quanto range is covered against currency movements through the quanto feature, and therefore eliminates the impact of the price of the foreign currency (EUR / USD) on products that are linked to underlyings quoted in a foreign currency.

Gina Mendes, head of product management for Spain at Commerzbank, told SRP that the introduction of the quanto feature is a logic development to provide innovation in the market.

“On the one hand, there was an increase in demand from our clients for bonus cap products linked to US underlyings; on the other, we want to offer different possibilities of investment so that our clients can invest in products that meet their market views,” she said. “The ‘quanto’ feature simplifies the return profile at maturity and eliminates the currency risk for those Bonus Warrants linked to underlying assets denominated in US dollars.”

The new Bonus Warrants Cap Quanto range will not be listed on the stock exchange and can only be traded through broker dealer platforms ICOM and Renta 4 Directo.

Bonus Cap - Subyacente EEUU - Quanto

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According to Commerzbank, from the perspective of an investor in the eurozone the lower the rate of interest abroad (compared with the interest rate of the US), the more favourable the cost of so-called “forward quanto “ (the expected price of the underlying asset) and the coverage of currency risk.

“At the same time, the higher the correlation between the underlying asset and the currency exchange rate, the more expensive the ‘forward quanto’,” it said. “The extremely low interest rates in Japan, for example, makes quanto products on Japanese indices especially attractive.”

The German bank is also marketing a series of Bonus Cap linked to European underlyings (Airbus Group NV, Allianz SE, BMW, Daimler AG, Deutsche Bank, Deutsche Telekom, E.ON SE, K+S AG, Muenchener Rueck, Volkswagen AG Preferred Stock and Société Générale); as well as to 19 different Spanish stocks.

Mendes also said that in future Commerzbank could expand the quanto range to other currency denominations if there is demand from investors and the market provides with good opportunities to invest.