Structured products are one of the most complex outcomes of the financial innovation process. Our analysis comes from the recent debate on the social welfare implications of financial innovation and how much the financial innovation process could be let free or should be more regulated. Our research questions are the following: who profit from the financial innovation, represented by the structured products? Is the issuers behavior, proposing new products, influenced by the market trends? Answering this questions, we analysed two different datasets. Considering the structured products complexity, we prefer to keep simple our research methodology, looking for the first answer, we analyze at the payoff frequency of 11,448 structured products issued in Italy, Germany, France, Switzerland, Belgium, United Kingdom and Spain and expired from January 1st 2008 to December 31, 2012. According to our sample, 62,1% of the structured product expired is “above par”, 13.6% is repaid “at par” (without considering transaction costs) and 24.3% of the sample is “under par”, but the comparative analysis of the samples can reach various conclusions, depending on the country. For example, focusing on Italy, the gross performance data of the products are much more negative than in all the others: only 27.1% of the Italian sample is “above par”, 17.1% is repaid “at par” and 55.7% of the sample is “under par”. The difficulty of obtaining complete data for all the analyzed products and the differences among the samples of countries induce to hypothesize some selection bias in our dataset. In other words, it seems that the information is more available, if the performances are positive. Answering the second question, we focus our analysis on 1,399,005 structured products, launched in the same markets from January 1st, 2008 and December 31, 2012. Watching at the issuers timeto-market, our research shows a very interesting negative relationship between the volume issued and the number of listed products. This trend could be the signal of a stimulating demand process by the issuers, trying to attract the investors. Additionally we note the tendency to increase the number of instruments issued during positive market trends, when investors are more likely to accept the offers for investment in new products. Combining this findings, the “product intervention” approach, adopted by the Regulators during the product design phase could be useful to discourage pushing behavior

Are the structured products a sustainable financial innovation?

BURCHI, ALBERTO;MUSILE TANZI, PAOLA
2014

Abstract

Structured products are one of the most complex outcomes of the financial innovation process. Our analysis comes from the recent debate on the social welfare implications of financial innovation and how much the financial innovation process could be let free or should be more regulated. Our research questions are the following: who profit from the financial innovation, represented by the structured products? Is the issuers behavior, proposing new products, influenced by the market trends? Answering this questions, we analysed two different datasets. Considering the structured products complexity, we prefer to keep simple our research methodology, looking for the first answer, we analyze at the payoff frequency of 11,448 structured products issued in Italy, Germany, France, Switzerland, Belgium, United Kingdom and Spain and expired from January 1st 2008 to December 31, 2012. According to our sample, 62,1% of the structured product expired is “above par”, 13.6% is repaid “at par” (without considering transaction costs) and 24.3% of the sample is “under par”, but the comparative analysis of the samples can reach various conclusions, depending on the country. For example, focusing on Italy, the gross performance data of the products are much more negative than in all the others: only 27.1% of the Italian sample is “above par”, 17.1% is repaid “at par” and 55.7% of the sample is “under par”. The difficulty of obtaining complete data for all the analyzed products and the differences among the samples of countries induce to hypothesize some selection bias in our dataset. In other words, it seems that the information is more available, if the performances are positive. Answering the second question, we focus our analysis on 1,399,005 structured products, launched in the same markets from January 1st, 2008 and December 31, 2012. Watching at the issuers timeto-market, our research shows a very interesting negative relationship between the volume issued and the number of listed products. This trend could be the signal of a stimulating demand process by the issuers, trying to attract the investors. Additionally we note the tendency to increase the number of instruments issued during positive market trends, when investors are more likely to accept the offers for investment in new products. Combining this findings, the “product intervention” approach, adopted by the Regulators during the product design phase could be useful to discourage pushing behavior
2014
Burchi, Alberto; MUSILE TANZI, Paola
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3980124
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