Structured Products – Part I: Introduction

(Part of Master Thesis: Kocyigit, Eren, “The Use Of Retail Structured Products And Their Applications In Turkey”, Istanbul Bilgi University, 2010)


Innovation process of the financial markets resulted in introduction of new products to the retail investors in response to these investors’ different needs. First of all, derivatives were offered by the financial institutions to the retail investors as an alternative to such conventional spot products as stocks, bonds and commodities. Due to the fact that the retail investors weren’t satisfied and started to seek alternative instruments again, issuers started to introduce new instruments. These instruments are called structured products and formed by the combination of several products that already exist in financial markets. These structured products have new- generation innovative, tailor made structures consisting of more than a single product in order to cater the special needs of the retail investors. This study will thoroughly examine the detailed use of these innovative products in the financial markets; especially in Turkish context. In addition to looking over their usage, their main characteristics and features will be analyzed for different types of products from different markets. Throughout the study, structured products will be analyzed in either Turkish context or in rest of the world. Findings through the chapters will be compared and discussed at the end of the study.

Table of Contents



  • Studies About Regional Structured Products Markets
    • North American Markets US Market
    • Canadian Market
    • European Markets
    • Swiss Market
    • German Market
    • Dutch Market
  • Studies About Structured Products in General
  • Studies About Anatomy of Structured Products
  • Studies About Pricing of Structured Products
  • Studies About Regulation of Structured Products
  • Overview of Literature Review


  • Definition of Structured Products
  • Composition & Design of Structured Products
  • Types of Structured Products
    • Structured Products and Their Market
      • Structured Products in OTC Markets
      • Structured Products in Organized Markets
    • Structured Products and Their Underlying Instrument
    • Structured Products and Their Risk Level
      • Capital Protected Products
      • Yield Enhancement Products
      • Participation Products
      • Leverage Products
  • Pricing of Structured Products
    • Black & Scholes Option Pricing Method
      • Pricing a Structured Product with Black & Scholes Model
      • Pricing a Reverse Convertible (Exchangeable)
      • Pricing a Discount Certificate
      • Pricing a Outperformance Certificate
  • Advantages and Disadvantages (Risks) of Structured Products
    • Advantages of Structured Products
    • Disadvantages & Risks of Structured Products


  • Retail Structured Products in All Regions
  • Retail Structured Products in European Market
    • Terms of Retail Structured Products in European Market
    • Underlying Asset Classes of Retail Structured Products in European Market
    • Development of Retail Structured Products Issued and Sold in European Market
    • Important Countries for Retail Structured Products in Europe
  • Overview of Market Reviews


  • Current Situation of Retail Structured Products in Turkey
  • Types of Retail Structured Products in Turkey 
    • Structured Funds (Capital Protected/Capital Guaranteed Funds – CP/CG Funds)
      • Definition of CP/CG Funds
      • Composition and Operating Process of CP/CG Funds in Turkey
      • Offered CP/CG Funds in Turkey
      • Advantages & Disadvantages of CP/CG Funds in Turkey
      • Taxation of CP/CG Funds in Turkey
      • Things to be Considered Before Investing in CP/CG Funds
    • Structured Deposits
      • Definition, Composition and Types of Structured Deposits
      • Structured Deposits in Turkey
      • Most Common Types of Structured Deposits in Turkey
      • Advantages & Disadvantages of Structured Deposits in Turkey
      • Taxation of Structured Deposits in Turkey
      • Things to be Considered Before Investing in Structured Deposits
  • Conditions Regarding the Development of Retail Structured Products in Turkey
    • Conditions Influencing the Development of Retail Structured in Positive Manner
    • Conditions Influencing the Development of Retail Structured in Negative Manner



Appendix A: Most Common Types of Exotic Options

Appendix B: Structured Retail Products in Regional Markets

Appendix C: SSPA Swiss Derivative Map



The necessity of structured products arises in financial markets in order to meet different needs of the investors. Low interest rates throughout the world accelerated their usage which in returned courage more financial innovation and reshaped customer preferences.

Structured products are designed to meet investors’ demands in different combinations of instruments both in spot and in options markets. There exists unlimited ways to design structured products; which enables them to be defined as “tailor-made”.

The subject of structured products is comprehensive when all types of these products are considered. This study will try to focus on retail structured products, traded by the retail investors in the market, for speculative purposes. In the study, retail structured products will be examined firstly in global context and followed by Turkish market. Since the entire study will be about retail usage of the structured products, hereafter term ‘structured products’ will be mentioned through the study to state retail structured products.

The main purpose of the study will be to explain the usage of structured products by examining their main features and characteristics. From this perspective, study will analyze the main features of structured products including the definitions, compositions, main types, risks, advantages and the disadvantages.

Study aims to examine the usage of structured product in all financial markets, focusing in the Turkish one. In this examination, one of the most important purposes of the study will be to analyze the structured products’ current situation among other financial instruments and their future development in Turkey. As a whole, study will try to make a contribution to the literature about the use of retail structured products in financial markets, especially in Turkish market.

Study will begin with a through literature review (chapter 2) on the subject and continue by observing the main features and characteristics of structured products in chapter 3. This chapter will observe the definition, composition, main types, advantages, disadvantages and risks of structured products.

Beginning with the 4th chapter, study will start to emphasize the use of structured products in different regions such as Europe, North America, Asia & Pacific and Latin America. Within this chapter; number of products issued and volume of products sold will be determined for the European Market according to types, terms and underlying asset classes of these products. Furthermore, emphasis will be given to countries where structured products constitute a significant market share among other derivatives. Conclusions derived out of the findings will be presented at the end of the chapter.

Fifth chapter will deal with the retail structured products in Turkey by dividing them into 2 groups; structured funds and structured deposits. Firstly, current situation of Turkish market about structured products will be analyzed. Then structured funds in Turkey will be examined according to their definition, composition, advantages and disadvantages. After this examination an analysis covering 66 structured funds, introduced into market by Turkish banks between 2008 January and 2010 March will be made. After this analysis, main features, impacts and most common types of structured deposits (including Dual Currency Deposit, Range Accrual, Double No Touch and Wedding Cake); will be emphasized with simulated examples. At the end of this chapter, the conditions regarding the development of retail structured products in Turkey in conjunction with pros and cons will be detailed.

At the final chapter, all the findings and outcomes that are abstracted through the whole study will be presented briefly, as an attempt to explain the use of retail structured products and their applications in Turkey. In this conclusion chapter, structured products market and its current situation, especially in Turkey, will be analyzed in order to discuss the extension of developments in the future.