Investors who are reluctant to invest directly in equities in view of this environment and the associated uncertainties are therefore increasingly considering structured securities. With these, stock market risks can be better limited than with direct investments. They have a wide variety of design options that act as adjusting screws for risk adjustment. In addition, the terms of share-based certificates can be particularly attractive in volatile markets.
Play especially in sideways trending, only slightly rising or even slightly falling stock markets Express Certificates their strengths. They offer an interesting interest rate opportunity on the one hand and the possibility of early repayment (hence “express”) on the other. In return, investors take on precisely defined share price risks.
In principle, Express Certificates have a fixed term, which can, however, automatically end prematurely. The development of an underlying value, for example a share, is the only decisive factor for this. If the share price on the respective observation day is at or above a price threshold defined when it was issued, the redemption threshold, the certificate is redeemed early at the nominal value. Depending on the variant, the interest payment can be fixed or dependent on the development of the underlying.
If the share closes below the redemption threshold, the certificate continues to run as intended. This check is carried out periodically, usually annually. If the certificate does not mature early, the share price on the last valuation day is considered in relation to a lower price threshold, the barrier. In this respect, the barrier is a feature that ideally can work in the investor’s favor at maturity. If this is not undercut, the investor also receives the nominal amount back. Otherwise, a specified number of shares will be delivered in lieu of par. This entails price risks, because their equivalent value is less than the nominal amount, i.e. 100 percent.