TABLE OF CONTENTS From an investment viewpoint, fixed income structured products (FISPs) are comparable to unsecured unsubordinated debt by the issuer (for the definition of FISP see section 12.2). Usually, although not always, FISPs have debt instruments as underlying. With the exception of products involving equities, FISPs could be compared to classical bonds offered by the issuer. Up to a point, the underlying is the same; however, the result is different because the capital protection offered by FISPs has a cost. In terms of popularity, there is no free lunch. Today:
The different types of classical bonds master a huge market share.
By contrast, the market for FISPs is fairly small, but their proponents say that it is growing at rapid pace.
This is a statement that should be considered with caution. Caution is also necessary in deciding about investing in FISPs, for reasons to be examined in this chapter. Notice, too, that the reference to 'fixed income' is a misnomer, because FISPs are derivatives and derivatives are versatile. The resulting products may:
Feature fixed or variable interest rate,
Combine bond-type and equity-type characteristics, or
Target credit risk associated with debt issuance.
Still, as far as this whole class of financial instruments is concerned (essentially the text in this chapter and in Chapter 13), it is advisable to stick with the market term of fixed income derivatives, even though this is not a precise title. Furthermore, there is a certain overlap between FISPs and equity-based structured products (discussed in...
