Downside protection: what are the choices?

Downside protection on structured products typically falls into two camps: no downside exposure for fully capital protected products and full downside exposure if markets fall by more than a set amount via soft protected products. Full protection Let’s look at how a fully protected product is constructed. For simplicity’s sake, let’s assume the product pays 100% of any FTSE 100 Index increase over six years, uncapped. There are two components to this product: First, a long call option on the FTSE 100 Index to give exposure to any upside performance, and secondly, a zero-coupon bond ...