Platon Lab

Section 1.1

The contractual wrapper

5–7 min
1 visualization
Mini-quiz · 3 questions

Essential question

If a structured product is not an asset class, then what is it — and why does this distinction change everything for your portfolio?

Discovery Guided observation

Listen to what a portfolio manager says in a client meeting: "We are going to put 10% of the portfolio into structured products." That sentence contains an invisible analytical error. A structured product is not an asset class — it is a contractual wrapper: a contract signed with a bank that transforms your exposure to something else — a stock, an index, gold, a currency.

It is that "something else" — the underlying — that defines your true exposure. A product linked to the SMI is Swiss equity risk. A product linked to gold is commodity risk. Putting both into a "structured" bucket is like filing a raincoat and a parasol in the same drawer because they are the same colour.

Before the visualization — form your intuition

What does the wrapper contain?

If every structured product is a wrapper, what does it contain? What are the 3 fundamental building blocks of any structured product?

01

Visualization · Wrapper configurator

Build a product by choosing its 3 building blocks. Watch the real classification of your exposure — and what makes it change.

GENERATED PRODUCT

BRC Nestlé · UBS · 2 years

Payoff shape–30%0+30%underlying performance
Naive classificationStructured products
Real classificationSwiss equities
Counterparty riskUBSA+Moody's rating, illustrative
▸

Play with the 3 building blocks. Change the underlying → the real classification changes. Change the rule or the issuer → it does not. That is the whole message of the wrapper.

YOUR TURN TO PREDICT

The client's three wishes

A client wants all three at once: 100% guaranteed capital, an 8% annual coupon, and a 1-year maturity. Achievable? Why?

The trade-off triangle
Pick a priority — see what you give up
YieldProtectionShort maturity
Every structured product trades off three poles. You never maximise all three at once: pushing one corner mechanically pulls away from the other two.
Practice Guided exercise
Case studyIdentify the components of a real product
A bank offers you the following product: if the SMI index does not fall by more than 30% within 12 months, you get your initial investment back plus a 6% return. Otherwise, you receive SMI fund units at their market value.

Identify the 3 fundamental components of this wrapper:

Underlying
Main rule
Issuer

Key message

A structured product is not an asset class — it is a contractual wrapper that transforms exposure to an underlying. It is the underlying that defines the real asset class in your portfolio.

The Swiss financial centre is one of the most active in the world for structured products. SIX Structured Products is the reference exchange for listing and trading. The SSPA publishes annual statistics by product family and by issuer.

Elaborative prompt: You manage a portfolio for an institutional client. You hold two structured products — one on the SMI, the other on a government bond. How would you classify them in your reporting? Under which line each — and why?
Mini-quiz · Section 1.1
3 diagnostic questions
~3 min · instant feedback

Question 1 / 3

A management report groups 8% of the portfolio into a single line labelled "Structured products". What is the fundamental error in this presentation?

Question 2 / 3

A portfolio manager compares two structured products issued by the same bank: Product A is linked to the price of gold, Product B is linked to the Nestlé share. How should they be classified in an allocation report?

Question 3 / 3

A client holds a structured product on Nestlé issued by a bank. The bank goes bankrupt. Nestlé, meanwhile, is doing perfectly well. What happens to the client?

0 / 3 answers
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