Week 11: Indices in volatile times
The number of new infections in China is already decreasing
There is actually only one direction for the global stock markets - downwards. Due to Corona a climate of fear is being created. Numerous events worldwide has been cancelled and some regions are completely separated. The big stock market indices partially decreased around 20%. However there are also good news, which are not included in the current prices:
- The number of new infections in China is considerably declining
- The number of new infections in South Korea is considerably declining
Since China is seen as the seat of COVID-19, these are great news. There is a high probability that the numerous measures worldwide will slow the spread significantly. Normality will return. According to some experts the "peak" in China and South Korea is already reached. There will be a decline in new infections in a couple of weeks also in Europe and America.
We use the currently high volatilities by developing a short-term 6M Barrier Reverse Convertibles on Indices. Due to the safeguard measures such as a Put Strike (75%), a european Barrier (69%) or an american barrier (59%), the risks compared to a direct investment are reduced significantly, without foregoing attractive Coupons.
6M BRC on Indices in CHF/EUR/USD
| Currency | CHF | EUR | USD |
| Denomination | CHF 1'000.-- | EUR 1'000 | USD 1'000 |
| Maturity | 6 months | ||
| Underlying (Worst Of) | Swiss Market Index (SMI) Euro Stoxx 50 (SX5E) Nikkei 225 (NKX) S&P 500 (SPX) |
||
| Coupon guaranteed with Put Strike 75% |
9.00% p.a. | 9.60% p.a. | 10.60% p.a. |
| Coupon guaranteed with Barrier (european) 69% |
13.76% p.a. | 14.52% p.a. | 16.44% p.a. |
| Coupon guaranteed with Barrier (american) 59% |
12.24% p.a. | 12.88% p.a. | 14.28% p.a. |
| Observation | Quarterly | ||
| Autocall | 100% | ||
| Indication | 10.03.2020 | ||
| Size | [CCY] 1'000'000;-- | ||
| Issuer | Rating A- minimum | ||
| Issue Price | 100% | ||
| Finders Fee | Up on request | ||
We are happy to customize the relevant components exactly to your personal preferences. Please imagine that the indications can change day by day.
Are you interested in this topic? Please contact us and we will replicate your personal market view "tailor made" with our innovative products. .
Text und analysis by Florian Franz
Partner at Carat Solutions AG
The chart provides you the development of the relevant underlyings during the last 6 months:
