Glossary - H
This section provides an explanation for some of the jargon used to describe structured retail products. If you would like us to add additional words then please let us know by clicking here.
The Hang Seng index is an index of shares of the largest 33 companies weighted by market capitalisation in Hong Kong.
The annual income being offered for an Income product. For a "Growth and Income" product the rate of interest paid on the income paying element of the product.
High Income Product
This is a type of structured product that pays an income that is above the rate of interest available on conventional fixed rate Deposits.
In exchange for this higher income however the investor may receive less than his original capital at maturity if the underlying index or indices fails to perform as required (see Reverse Convertible).
A return based on the performance of a basket on maturity. The performance is the arithmetic mean of the basket’s component assets at the end of each period. A pre-selected number of best-performing asset or assets are permanently removed from the basket, or frozen at their performance level, at the end of each period until the remainder of the investment. The underlying is usually a basket of sector indices or diversified shares.
There are two types of hindsight options. The first type pays out at maturity the difference between the strike price and the highest (for a call option) or lowest (for a put option) level of the underlying during the term of the option.
The second type pays out the difference between the lowest (for a call) or highest (for a put) level of the underlying and the final level of the underlying. In this case essentially the option’s strike price is set at maturity to be the highest or lowest level of the underlying during the term.
This feature is sometimes incorporated in structured products as a means of determining the final index level. Thus some products will use the highest or lowest level of the index during say the last few weeks of the products term in determining the final index level to be used in calculating the final return.
Finally a hindsight option is also sometimes called a Lookback option.
A mortgage-wrapped product where repayments vary according to the performance of the underlying.
The historic volatility of a share or index is simply a mathematical measure of its variability during a given historical period, for example the last 3 months.
The most common form of measure is the standard deviation of the daily returns.
Historic volatility is usually quoted as a percentage figure and is simply a means of measuring the relative riskiness, in terms of price variability, for different shares, indices, assets, etc. Thus a share or index with a higher historical volatility, such as the Nasdaq100, will be regarded as more risky than one with a lower volatility.