The US structured products market is on track to reach $300 billion in sales this year, highlighting the rapid growth of a financial product that has historically been difficult for many investors to understand.
Structured notes combine a bank’s debt obligation with a derivative. Their terms can be designed to provide exposure to specific market strategies, including approaches that seek to take advantage of volatility.
The products have also become closely associated with how investors are positioning themselves around the artificial-intelligence trade. Their flexibility allows market participants to build strategies around the sharp price movements affecting parts of the market.
Alex Micalizzi, Nomura’s international head of equity structured notes, discusses how these products are created and work, as well as the reasons behind the strong increase in sales over the past year. His explanation is featured in an episode of the Odd Lots podcast.
Sources: Bloomberg Markets.