2. Airbag
Airbag Certificates (Parachute
Certificate, Cushion Certificate)
A certificate that offers protection
against downside losses to a pre-
defined minimum level but allows an
unlimited participation in upside
movements of the underlying.
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3. Participation Products
Airbags is a sub-category of Participation Products.
Participation products offer unlimited participation on the
performance of the underlying. Many participation
products offer conditional capital protection that
deactivates when a certain barrier is reached during the
lifetime of the product.
The downside risk is often the same as a direct
investment in the underlying. These products are
suitable for an investor with a certain risk appetite. The
market expectation may be either bullish or bearish.
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5. Airbag Structure
Profit Airbag certificates offer
unlimited participation on an
increasing underlying.
They offer conditional
capital protection and an
0 above-average return if the
underlying trades sideways
or slightly lower
underlying
Limited protection level
Loss
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6. Limited Protection
“Airbag certificates” provide partial capital protection.
Just like the real airbags, it will protect you quite effectively
up to a point, but if the crash is a severe one, you can’t count
on it!
E.g., if the index ended up at 70% of the original index level,
within the airbag range, an investor would get 100% of the
issue price back. If it ended up at 60% of the original level,
an investor would get 60% of the original issue price,
because the index level is outside the airbag zone.
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7. The beauty of Airbag
The protection level of the Airbag doesn’t knock-
out. It stays until the maturity of the product no
matter.
Above-average return if the underlying security
trades sideways or slightly lower.
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8. Conclusion
• Airbag structures have their pro
and cons. So understanding
the risk of these products
before investing will be the
most important!
Contact me at ngkaichong@yahoo.com
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