Financial products - english FINANCIAL PRODUCTSare classified into three main categories depending on the function inherent in the investor's point of view. As a result of investment in one of the available types of financial products, the investor becomes either the owner or by the lender, or is entitled to buy or sell the product. One of the most popular financial products are shares, bonds, investment funds, warrants and options.
Shares are submitted by the ownership of the investor to the share of ownership in the company. They are usually selling investors on stock exchange and over-the-counter markets, which calculate that their market value will increase after a certain time. In turn, a company that sells shares receives instead of the funds necessary for the development of its activities. In addition, such a financial product as promotions can make a profit of its owner also in the form of dividends, which are part of the issuer's company's profits paid to shareholders.
Bonds are financial products that are a debt obligation arising from the issuer's company before its investors. Unlike shares, the investor does not receive a share of ownership in the company. This type of investment usually has a lower profitability than stocks, but also is associated with a lower risk. Investors are transferred to the issuer in cash that should be paid to them for a specific date in the future (repayment date) along with interest. If the investor wants to get rid of his bonds before the date of repayment, he can resell them to third parties. At the same time it is unlikely that its market value will be equal to the nominal value, which must be paid to the investor at the repayment date. Most likely, the investor will receive the market value of the bond, which may be greater or less than its denomination. Bonds produce not only private companies, but also state bodies, including central, municipal and local authorities.
Investment funds are combined financial products that may consist of money market tools, stocks or bonds. They usually do not invest all their funds in one particular company or financial instrument, and form investment portfolios. These funds use combined investors to acquire a certain number of shares, bonds or other low-risk investments to diversify their portfolios and reduce the risk. Depending on the financial goals of their investors, investment funds can offer different risk levels: from high-risk investments in the shares of transnational corporations to low-risk bond funds.
Warranrants and options give the investor the right to buy or sell a certain financial product. At the same time, their acquisition does not give an investor of the status of the creditor or the owner. For example, options for shares make it possible to buy or sell shares of a certain company in advance of the specified price (execution price). Such investments are carried out either for hedging, or exclusively in speculative purposes, calculating that the market value of the basic asset will change in such a way as an investor assumed.
For more than 10 years, Sberbank of Russia has been participating in financing long-term investment projects in all sectors of the Russian economy, being a market leader in terms of financing provided, according to the degree of sectoral and product diversification.
The Bank has accumulated extensive experience in the provision of classic investment lending services and project financing and in terms of the implementation of non-standard integrated financial products.
The bank offers the following services for corporate clients.
- Mid- and long-term financing of investment projects
- FINANCING Merge and Absorption Transactions (M & A)
- Financing leasing transactions
- Organization of placement of bond loans
- Providing bank guarantees in the framework of financed projects
- Lending within the framework of export financing for the Insurance of the Export Agency
Forms and terms of lending
Lending is carried out in the form of a one-time loan or by opening a credit line, both within the limits established by the enterprise and on the basis of the consideration of individual investment projects.
Credit can be provided in rubles or in foreign currency for up to 10-15 years under various forms of provision.
With more detailed information on financing contracts for the import of goods and capital services at the expense of foreign banks under the coverage of the Export Credit Agency.
Structured products (SP) are comprehensive financial instruments based on simpler (basic) financial assets. In essence, structural products are "packaged" investment strategies. They are often combinations of traditional investments in promotions, bonds and derivative financial instruments.
Traditional investments and derivatives are combined into a single financial asset and securitize. Structuring allows you to receive investment products with risk-yield parameters corresponding to specific needs and expectations of investors. Structural products have a different form (legal shell) and are issued by investment companies and banks.
Advantages and relevance
According to the European Association of Structured Investment Products (Eusip, www.eusipa.org), they are increasingly conquering trust among investors. The reasons for the success of structural products lie in their basic properties: a certain (pre-known) level of profitability, protection against unfavorable market conditions and fixed investment time.
It should also be noted that the timing of the launch of new structured products is rather short, which allows them to quickly respond to new trends in the financial markets.
Increased volatility in the foreign exchange markets, stock markets and bonds creates favorable conditions for investing in structured products. Low interest rates on the developed capital markets also force investors to look for new financial instruments.
According to the EUSIP report, in the first quarter of 2015, the turnover of transactions with structured products traded on the stock exchange increased by 30% compared to the last quarter of 2014 and amounted to € 39.2 billion, growth to the first quarter of 2014 amounted to 17 %. In the first three months of 2015, European banks have released more than 980 thousand structured products. Eton 30% exceeds a similar indicator of award-winning quarter and 46% of the previous year.
The volume of structural products released in the first quarter amounted to more than € 260 billion. There is no organization to the Russian financial market, centrally taken into account with the structured products, therefore it is evaluating its volume and its dynamic. According to the sales management of structured products and financing company "Ai Ti Invest", whose employee is the author, in the fourth quarter of 2014, among private investors, the products related to the course of the national currency were in demand, in the first and second quarters of the 2015th, the increased state was preserved.
The main types of structural (structured) products
There are many different types of structured products. Most of them are based on simple tools freely on the stock exchange. Nevertheless, investors often cannot independently "collect quality joint ventures" due to the lack of access to a wide range of capital market tools, restrictions on minimal transactions, the size of commissions and stock fees, as well as insufficient examination in the field of structuring, estimating the cost of derivatives and hedging.
As noted earlier, there is no organization in Russia systematizing information related to the release and reference of structured products. Therefore, there is no official classification of the joint venture. As a conditional classifier, in such a case, a map of structured products developed by Eusip for the European market (is on the organization's website). Let's look at it in more detail.
Investment products are a wide class of structural products, including products with different nature of risk and profitability, but united by a common attitude to investment principles. Each of this class products can be considered as an investment in valuable paper or strategy, while the risk, profitability and participation in the growth or fall in the basic asset of the structured product are elements of the packaging system and transformation of the risk of investment.
Leverge products have a completely different nature of attitudes towards risk and profitability. Structured products of this class imply the loss of the entire invested amount in the case of an unfavorable script for the selected strategy. On the other hand, Leveridge also assumes a high potential yield in case of a favorable outcome. The lion's share in the filling of these joint ventures occupy option contracts, including exotic. By the way, in Russia, leverage-products did not become popular, Russian investors show the greatest interest in the investment group structural products: with capital protection and increased yield.
Capital Protection (Structural Product)
Products with capital protection provide a guarantee of returning the nominal amount of investment - full or partial (to choose an investor). In addition, they offer participation in income from growth or falling prices for the selected base asset.
Products with capital protection are suitable for investors who avoid risk. They can be structured to income from both growth and the fall of the market during the life of the product according to the investor expectations regarding his behavior.
The main parameters of the protection of capital - the level of protection, the basic asset, the investment period, participation in growth or fall, threshold prices, allow you to make a flexible setting of products under current market conditions.
Structural product with capital protection, popular in the Russian market:
Unlimited participation
Limited participation
Binary
Unlimited participation (structural product)
These products suggest complete or partial capital protection (to choose an investor) plus participation in the yield of the basic asset.
Market expectations:
The growth of the basic asset;
Growth of volatility;
Characteristics:
Unlimited potential income;
The yield is determined by the parameter characterizing the level of participation and the price of the basic asset at the date of repayment of the product.
Profile profitability
Structure - fixed-yield tools and purchased options of type Call.
Limited participation (structural product)
These products suggest complete or partial protection of capital (to choose an investor) plus participation in the yield of the basic asset to a certain level.
Market expectations:
The growth of the basic asset;
The possibility of a sharp drop in the basic asset.
Characteristics:
Payment at the end of the term will be at a minimum equal to the level of protection;
Capital protection is determined as a percentage of the initial amount of investment (for example, 100%);
The cost of the product may be below the level of capital protection to the date of repayment;
The yield is determined by the parameter characterizing the level of participation, the price of the basic asset at the date of repayment of the product and the maximum possible level of profitability.
Profile profitability
Structure - fixed return tools and vertical Call-spreads.
Binary structural products
These products suggest complete or partial protection of capital (to choose an investor) plus an increased yield in the event of the growth of the basic asset to a certain level.
Market expectations:
The growth of the basic asset;
The possibility of a sharp drop in the basic asset.
Characteristics:
Payment at the end of the term will be at a minimum equal to the level of protection;
Capital protection is determined as a percentage of the initial amount of investment (for example, 100%);
The cost of the product may be below the level of capital protection to the date of repayment;
The yield is determined by the price of the basic asset at the date of repayment of the product and the maximum possible level of profitability.
Profile profitability
Structure - Tools with fixed return and binary options Call.
Increase profitability (structural product)
Structured products offer income as a fixed coupon or multiple coupons. Investors refuse to participate in the growth or fall of the basic asset in favor of a one-time or series of payments. Products with increasing profitability are suitable to investors, ready to take a moderate or increased risk of their investments and waiting for the lateral movement of the basic asset during the period of the product. Potential yield is limited, while the risk of the product is below direct investment in the base asset.
The terms of the products are usually short and amount to 1-6 months, if the product is serial - up to 2 years. The higher the current volatility of the basic asset, the greater the fixed coupon. The expected declining volatility forms favorable conditions for buying products with increasing yield.
Structured products with increasing profitability, popular in the Russian market:
Reverse-convertible;
Avtovykup ("Phoenix").
Reverse-convertible structural products
These products offer investors an increased yield in the form of a fixed coupon. Upon completion of the product, the client returns 100% of the originally invested funds if the price of the basic asset will be higher than the pre-installed price of the strike. Otherwise, the investor receives a predetermined number of basic asset. The coupon is paid in both cases.
Market expectations:
Neutral or weak positive dynamics of the basic asset;
Reduced volatility.
Characteristics:
If the price of the basic asset will be lower than the price of a strike at the date of repayment of the product, the basis asset will be purchased on the invested funds at a predetermined price;
If the price of the base asset will be higher than the price-strike at the date of repayment of the structured product, the investor returns the initially invested amount plus a predetermined coupon;
The coupon is paid in any case, regardless of the price of the price of the basic asset at the date of repayment relative to the price - a strike;
The product allows you to get a basic asset at a lower price;
Potential losses are less than with direct investment in the base asset, but comparable in absolute size;
Limited profitability of reverse-convertible products.
Profile profitability
Structure - fixed return tools and sold PUT options.
AvtovykUP (Structural Product "Phoenix")
Products of the type "Avtovykuk" are multi-line products for one or more basis assets with initial prices and barriers, as well as the possibility of early revocation (early repayment) by the issuer of the product (not from the investor - the buyer of the product). There are various variations of the consideration of such products, in the general case they are similar to those described below:
1. If at the end of any period of the price of all basic assets will be higher than the established initial prices, the product will be repaid early (AUTOCALL Event) with a payment of 100% of the initially invested amount plus coupons of all past periods;
2. If at the end of any not the last period (the estimated period of the period does not coincide with the end date of the product) at least one of the assets will be lower than its established barrier, then the coupon for this period is not paid, but the product action continues. If, in the subsequent period, the price will increase and the established barriers to the calculation date will exceed, the client will receive a coupon for this period, as well as all coupons not paid in previous periods;
3. The product execution at the end of the last period will depend on the mutual position of the price of basic assets relative to the established barriers: if at least one asset fell below its barrier price to the repayment date, the product will be converted into a certain amount of lots of the most fallen base asset.
Market expectations:
Neutral or weak positive dynamics of the basic asset (baskets);
The basic asset will not reach the barrier until the end of the product.
Characteristics:
Early redemption of 100% plus coupon if the base asset (basket) is trading above the barrier price by the end of the period;
Possible early redemption together with an attractive increase in profitability;
Smaller risk than with direct investment;
Limited potential yield.
Profile profitability
Payments on this product comply with the sold and call options, plus (sometimes) vertical call-spreads on basic stroke assets corresponding to barrier and initial levels opened in a specific sequence. However, in practice for hedging payments, the product issuer often does not make transactions with options, but uses replication of their cost using Delta Hedj. At the same time, assets with low correlation are selected to reduce the error in estimating the cost of the product value (payments).
Products with participation (structural products)
A separate product group in an investment class that does not provide the protection of originally invested funds. This is different from the products of the group with capital protection. The risk of investing in joint ventures with participation is usually the same as the risk of investments in the basic asset. However, their yield may be ahead of the profitability of direct investment in the basic asset, as well as have a zone with nonlinear yield.
It is worth noting that the products of this group are not popular in Russia.
Exotic structural products
The basic assets of the structured products described above are often promotions and currencies. This to a certain extent limits their "scope". For example, funds, corporations and major private investors (High-Net-Worth Individuals) are often necessary for the products hedging their investments and / or the results of their business activities. For them there is a class of so-called exotic products, which in addition to shares, stock indexes and currencies are: Credit default swaps (CDS), interest rates, consolidation assets (oil, gold, industrial metals, C / x goods) and volatility.
A good example of such a product is structured notes affected by the yield of the HFRG Russian Guardian Index index. The HFRG Russian Guardian index is constructed in such a way as to demonstrate significant growth in periods of financial stress of Russian assets.
In order to achieve this, the index consists of components representing the prices of derivative financial assets that can show significant growth in periods of financial turmoil in the country. The weight of the components correspond to premiums invested in these components. Prizes are the maximum possible loss associated with each of the components of the index. The weights of the components change dynamically in order to achieve the highest possible yield at a given fixed level of risk. Information on the HFRG Russian Guardian index is available at www.hedgefundresearch.com.
Dynamics HFRG Russian Guardian Index
Adding a structured note tied to HFRG Russian Guardian Index, to portfolios of shares, bonds and ruble deposits, can significantly improve their profitability and risk indicators in the stressful periods of the Russian economy, one of which, by the way, is observed now.
Principles of choosing a structured product
To select a structured product, the investor needs to decide on the following parameters of its future investment:
1. Risks - what part of the investment will be at risk and what the nature of this risk is.
2. Terms - for what period will be distracted by investment funds, maybe if it will take to take the means back to the date of completion of the product.
3. The basic asset - the investor must choose a financial asset that will determine the profitability of the investment produced.
1. The price of the basic asset will grow, fall or move in the side channel.
2. The volatility of the basic asset will grow, decrease or will remain unchanged.
And the last but very important: the investor must make the assumption of future interest rates in the economy - the rates will grow, decrease or remain unchanged.
As a rule, an inexperienced investor is difficult to immediately give answers to all of the above questions. It will also be difficult for him to navigate among the wealth of the forms and types of structured products. All this complicates the process of choice. That is why the structured product industry offers its customers not foods as such, but the strategy packed in them.
As noted above, thanks to the short periods of release and the diversity of the types of SPP react well to the changing market conjuncture. Perhaps this is one of the main reasons why structural products conquer increasingly popular among investors lately.
Investment products of banks are a fairly new opportunity that financial organizations of different levels offer. Their essence is quite extensive, because there are many options for working with investments, but the role of the bank in most cases is approximately the same - mediation. He himself relatively rarely will risk his own funds, preferring to use customer money and for this providing them with a part of the income received.
Features and causes of appearance
The need for such an instrument, as investment products, arose relatively recently. Up to this point on, the banks have completely successfully received a profit, taking loans for a small percentage and after that providing them with their own customers under a more significant rate. In addition, these organizations were actively used by their own means, because the deposit rate is always less than on the loan. However, gradually the situation on the market has stabilized, and now on a similar difference, if you can earn, then only relatively small, by the standards of banks, money. As a result, financial institutions began to look for alternative opportunities for existence and concluded that the sale of investment products is the most profitable method that allows you to earn money and further activities.
Investment and services
Not all banks provide at least some of the possible services whose species there is a lot. For example, most often investment products of a financial organization are exclusively from trust management services. That is, the bank simply takes the money of the client and with his consent begins to use them on the stock market.
As a rule, the Organization preferences are not too profitable, but reliable projects that will be likely to make a certain increasing income. This approach allows timely and in full payments to the client, and he, in turn, will be less risking its own money. However, this is not the only way to work with the specified financial instrument. The Bank can also take securities that will subsequently post on the stock exchange and dispose of them at their own discretion, but with the consent of the owner. Also, the financial institution can simply provide services for the purchase or sale of those most securities at the request of customers. Among other things, the Bank may produce securities, issue loans for implementation and so on.
Implementation and creation of the product
In order for the financial structure the opportunity to use investment products in their activities to receive income, it must first comply with certain requirements. So, the very first stage - obtaining a state license. Without this important document, any such activity can not be considered legitimate, and the client ideally should immediately specify the availability of this paper and require its presentation. Most banks make it without reminder, posting such licenses for the overall review. It is not too easy to get a document, and it is also necessary to prove that in the process of working with investment the organization will not proceed, will be able to make a profit and so on.
The next step can be considered the exchange of the bank to the international trading platform. In some cases, he should also provide access to it for its own customers, but this is not always done. It is impossible to say that this is a difficult stage, because such platforms are interested in a constant increase in the number of players, but certain efforts will still have to be applied.
After all this will be done, you need to hire or train professionals who know exactly how to work in this direction and make a profit. Otherwise, instead of expected income, solid costs will be obtained, and for the bank it is almost fatal.
As a result, this requires the need to create a specific structure in an organization that will deal with on the one hand, and provide investment products to potential customers - on the other. As a rule, such structures are divided into at least two branches, but these are the features of each individual bank.
The last stage is the technical side of the question. The bank can be registered in the system, get all the required licenses, hire excellent professionals and attract a huge mass of customers to maintain it, but if these most experts do not physically be able to work with trading platforms, all listed actions will be meaningless.
Possible problems
Like any have certain problems. So, it is more risky in comparison with the classical income generation systems, there are many legislative restrictions, as well as tight control by the Central Bank. The latter can simply prohibit the most profitable (but also risky) transactions, as this will violate the overall stability of the country's financial system.
Investment loan products
This is another option of the banking type financial organization, which is often offered to legal entities. Its essence lies in the fact that the bank acts as an intermediary between the client and the object of investment, issuing the first loan, and at the expense of it by investing funds. A sufficiently risky system, however, if you succeed and / or accurate calculation, it allows the legal entity to quickly repay the debt, the investment object is to get the required amount, and the bank is its part of the profit. In general, usually all parties are satisfied with the transaction, if it has passed successfully and no problems arose.
Benefits
The advantages that provide new investment products are quite numerous. The first of them can be considered the amount of profit. It is clear that the bank receives, as a rule, more income than the client himself. But the risks also bearing independently (at least in most cases). The second advantage is the help of specialists. Theoretically, anyone can independently become a player on the stock exchange and investment at its own discretion. However, in fact, this approach most often will lead to the fact that a person or legal entity will simply lose its money if it does not use the services of specially trained employees.
disadvantages
Naturally, there are always disadvantages. Thus, investment products still remain not only the most profitable financial instrument from all existing, but also the most dangerous from the point of view of possible risks. Most often, the bank still returns the client the amount that he put it, but the profits can not be waited. Moreover, in some cases, when the situation with income from the organization is very complicated, the return of money can be waited for a very long time.
RESULTS
In general, given all the above, it can be concluded that investments are favorable investments, but only subject to the availability of guarantees for income and general reasonable disposal by the Bank with funds received from customers. Unfortunately, most often this can only be determined by experimentally or at best, according to the reviews of other people or organizations that have ever risked their money.
Most modern people understand that money is not a place at home in bedside table or drawer of the chest. After all, it is not enough to accumulate savings. It is necessary to preserve, and even better multiply your own cash. To do this, they should be invested in investment products, goods or services.
Unfortunately, most of our country's citizens have very limited ideas about theory and investment practice. These people are accustomed to investing free cash in any bank selected on the basis of their ideas about the reliability and profitability of investments.
At the same time, the modern financial world offers a huge amount of investment services, products and goods that can bring an investor much more return. Let's get acquainted in more detail with their views and will understand everything on specific examples.
Investment goods are one of the basic concepts in economic science. It should be perceived literally. Under it should be understood the goods purchased on investment funds. Similar products Investors are used to organize the production process in enterprises. With their help, it is expanded and modernizing production, an increase in the volume of products, extension of production capacity.
Investment goods are:
- buildings and structures in all their manifestations. It can be a factory workshop, an electric substation, a warehouse of finished products, office premises. That is, all the facilities that are necessary for the normal organization of the work of the enterprise;
- transport communications. Under them should be understood automobile and railways, gas and oil pipelines;
- machines and production lines. This should also include spare parts and nodes of all mechanisms and equipment that are used in the factory under consideration or factory;
- raw materials and materials. All of which makes the final products that the enterprise produces is made.
Products
The investment product is an object in which investors can invest cash at their disposal. It is they are the main objects of investment for most private investors.
Currently, there is a huge number of similar products in the financial market. Everyone can choose the asset that fully meets its ideas about risks and profitability.
Investment products include:
- bank deposits or deposits;
- pAIs in mutual investment funds;
- different types of securities;
- investment programs of microfinance organizations;
- PAMM accounts and so on.
Investor needs to be very carefully referring to the choice of a particular investment product for money investment. It should be remembered about the existence on the investment market a large number of fraudsters. In this regard, when choosing an object for investment, you must adhere to several simple rules.
- First of all, you should evaluate the reliability and actual guarantees, which provides a company offering a specific investment product. This should be done with regard to banks, microfinance organizations (MFIs), mutual brokerage companies, and so on. If the guarantees do not seem reliable enough to you, then you should not invest money in the product in question.
- The investment product should have an investment memorandum or prospectus. Under them, it is customary to understand the documents for the external user. They should demonstrate to potential investors the attractiveness of such investments, as well as provide opportunities for analyzing probable investment risks. Moreover, such a memorandum and prospectus must have a legislative consolidation. In other words, they must be registered in the relevant state controlling and supervisory bodies.
- Investor must pay attention to the quality and level of service. If the employees of the bank or the PIF do not make a proper impression, do not understand what they are talking about, behave not correctly, it should not cooperate with such a company. After all, if they behave with potential customers, then you can only guess that they happen to communicate with real.
Services
Investment services are provided by different subjects of the financial market. These can be banks, consulting agencies, brokerage companies.
In particular, consulting agencies specialize in collecting, analyzing and providing information, about any other investment assets or subject. Services provided by them are very diverse. For example, specialists of a consulting agency may take on the development of an investment strategy that will include an assessment of the features of the selected industry, the level of potential risks and other indicators.
Investment services provided by banks require a separate serious conversation. Let's consider a specific example. This kind of services include the purchase or resale of shares (bonds, other securities). In this situation, the Bank can make an intermediary and security guarantor for the issuer, placing a promotion, or for an investor who wants to buy them.
Brokerage companies provide private investors in part of the formation and trust management of their money. In particular, the broker may form a customer to form and manage the investment portfolio. Such services are necessarily enshrined in the contract between the parties, in which all the conditions of cooperation and the commission for work are prescribed.
