New Investment Ideas

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2Y USD 103% KG Twin Win on SPX +/-12%

Following tensions over the international trade war and some sign of weaknesses in the US economy growth, the S&P 500 Index (SPX) recorded a loss of -5.84% in May (YTD +14.94%). Since the beginning of the year the SPX recorded 62.40% positive sessions vs 37.60% negative sessions

There is still uncertainty about the trend of the US equity markets going forward. The recent announcement of Fed rate cuts could lead to sustainable positive US equity markets. Still, some analysts are warning that we might encounter a market recession some time between Q4 2019 and Q1 2020. This strategy allows qualified investors to benefit from the absolute participation in both downside and upside in the index performance. The upper (+12%) and lower (-12%) barrier levels are observed only at maturity to determine the final payout. Regardless of the SPX's performance, qualified investor gets a minimum capital back of 103% after 2 years

This strategy has already been launched on the 24th of May (Strike price: 2,826.06), investors could either subscribe in the existing structure or define different parameters for a new launch

Product Parameters

Issuer rating A3 (rated by Moody's)
Currency USD
Maturity 2 Years
Exposition S&P 500 (SPX Index)
Capital protection 103%
Participation 100%
Barrier type European
Upper Knock-Out (KO) 112% at maturity
Lower Knock-Out (KO) 88% at maturity
Investor Profile Neutral sophisticated
Alternative 1 100% KG Twin-Win on SPX, European Barriers [124%, 76%]
Alternative 2 100% KG Twin-Win on SX5E, European Barriers [123%, 77%]
Alternative 3 100% KG Twin-Win on NDX, European Barriers [128%, 72%]

Mechanism

Scenario 1:At maturity, SPX is down by 10% (between the 112% Upper KO and 88% Lower KO)
Payoff: Qualified investors get 110% capital back

Scenario 2: At maturity, SPX is up by 11% (between the 112% Upper KO and 88% Lower KO)
Payoff: Qualified investors get 111% capital back

Scenario 3: At maturity, SPX is up by 1% (between the 112% Upper KO 112% and 88% Lower KO)
Payoff: Qualified investors get 103% capital back

Scenario 4: At maturity, SPX is up by 15% (above the 112% Upper KO)
Payoff: Qualified investors get 103% capital back

Scenario 5: At maturity, SPX is down by 20% (below the 88% Lower KO)
Payoff: Qualified investors get 103% capital back

The following graph represents the performance of the underlying over the last 5 years and the payoff at maturity:

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15M USD Athena on Brent, 7.60% p.a. memory

Brent has been under pressure last month (-10.65% in May) almost reverting to the Q4 2018 level, mainly due to the lower demand in oil. In addition to unplanned outages in refineries and fear that Iranian oil would come back to the market. Recently there was a decline on the forecast of unplanned outages. The next OPEC meeting in June may result in a continuation of production cuts until the end of the year. This could mean a slight recovery in Brent over next months

This 15-month strategy is suitable for qualified investors with a view Brent would not fall more than 40% (above the USD 37.88 level traded back in April 2016) over 15 months and could recover slightly. This strategy benefits from Brent's recent slight peak in volatility. It offers a cumulative coupon of 7.60% p.a. (maximum return = 9.50%), provides monthly exists if Brent persists with its downtrend and a conditional capital protected of 40% (European barrier) on the downside performance at maturity

If qualified investors would like to have a guaranteed return, an alternative is possible with a 7.25 % guaranteed coupon, the other parameters remain the same

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 15 Months
Exposition Brent (CO1 Comdty)
Observations Monthly
Autocall Triggers (from M3) Decreasing from 100% to 70% (-5% every two months)
Recall Rate 7.60% p.a. (memory)
European Barrier 60%
Investor Profile Neutral to slightly Bullish
Alternative 1 15M USD Autocall BRC, 7.25% p.a. guaranteed
Alternative 2 15M GBP Athena, European Barrier 65%, 6.40% p.a. memory
Alternative 3 15M EUR Athena, European Barrier 65%, 5.55% p.a. memory
Alternative 4 15M CHF Athena, European Barrier 65%, 5.15% p.a. memory

Mechanism

Scenario 1: In M5, Brent is down by 3% (above the 95% Autocall Trigger)
Payoff: Qualified investors get 100% capital back + 5 x 0.63% coupon (7.60% p.a.) = 103.15%. Product early redeems

Scenario 2: In M7, Brent is down by 12% (below the 90% Autocall Trigger)
Payoff: Product continues

Scenario 3: At maturity, Brent is down by 25% (above the 70% Autocall Trigger and the 60% European barrier)
Payoff: Qualified investors get 100% capital back + 15 x 0.63% coupon (7.60% p.a.) = 109.45%

Scenario 4: At maturity, Brent is down by 36% (below the 70% Autocall Trigger but above the 60% European barrier)
Payoff: Qualified investors get 100% capital back. No coupon paid

Scenario 5: At maturity, Brent is down by 45% (below the 60% European barrier)
Payoff: Qualified investors get 55% (100%- 45%) capital back. No coupon paid

The following graph represents the performance of the underlying over the last 5 years:

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5Y USD Hybrid CLN on French Republic and Steepener USD 30-2Y Swap Rates

Spread 30Y – 2Y USD Rates Swap recovered from February 2018 level. Qualified investors who missed a good entry point in December 2018, but still interested in gaining exposure to long term USD rates with a belief in the rise in long-term interest rates, could consider the below strategy (hybrid product offering exposure on the spread 30-2 including a Sovereign Credit Default Swap (CDS) risk on French Republic)

The below strategy allows qualified investors to cash in 3.00% p.a. guaranteed coupon the first year. Over the following 4 years, qualified investors receive a conditional coupon paid as a result of 4.81 leverage on the spread 30-2Y USD Rates (based on forward yield curve it will be equivalent to 2.62% Y2, 2.15% Y3, 1.63% Y4, 1.15% Y5). Betting on a widening of the spread 30-2Y is a rather expensive strategy as the market is already pricing it

In order to offer attractive terms (yield and capital protection) we added an exposure to the French Republic CDS (AA rated by S&P) with a current 5Y CDS at 28.52 recovering from its historical average over the last year (30.06). Therefore, the strategy suggested is a Credit Linked Note (CLN) on French republic (market recovery and European settlement) paying returns linked to the spread 30-2Y USD Rates

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency USD
Maturity 5 Years
Credit Exposure French Republic (AA rated by S&P, FRANCE CDS USD SR 5Y D14 Corp, 28.52)
Rates Exposure USD 30-2Y Swap Rates (USSW30 - USSW2, 0.4160)
Observations Annually
Coupon Y1 3.00% p.a. guaranteed
Coupon Y2 to Y5 4.81 * max(0%, 30-2Y USD)
Coupon convention 30/360, Up to Credit event, Fixing in Arrears
Recovery Market Recovery
Settlement European
Investor Profile Bullish Sophisticated

Mechanism

Scenario 1: On Y1, no Credit event occurred
Payoff: Qualified investors get 3.00% guaranteed coupon

Scenario 2: On Y2, no Credit event occurred and spread USD 30-2Y Swap Rates is equal to 1.10
Payoff: Qualified investors get 4.81 * 1.10 = 5.29% coupon

Scenario 3: On Y3, no Credit event occurred and USD 30-2Y Swap Rates is equal to 0.42
Payoff: Qualified investors get 4.81 * 0.42 = 2.02% coupon

Scenario 4: On Y3, no Credit event occurred and USD 30-2Y Swap Rates is equal to -0.12
Payoff: No coupon paid (coupon floored at 0.00%)

Scenario 5: On Y4, a Credit event occurred and USD 30-2Y Swap Rates is equal to 0.68
Payoff: Market recovery determined by ISDA. No coupon paid

Credit Event: If a credit event occurs, further coupons are forgone and the CLN will redeem at the final auction settlement price determined by International Swaps and Derivatives Association (ISDA: www.isda.org)

The following graph represents the performance of the Credit and Rates exposures over the last 5 years:

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New Investment Ideas

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3Y USD Athena decreasing on US Stocks, 16.00% p.a. memory

According to NY Times, both the United States and China seem to be digging into their positions in ways that will be hard to resolve with the kinds of mutual face-saving that typically turns high-stakes negotiations into deals. Nevertheless, media reported recently a commitment on both sides to solve the conflict. The actual political tensions create uncertainty in markets and allow qualified investors to benefit from potential drops

An escalation of the trade war has been and seems to be the main risk. Qualified investors might be interested by protecting themselves against a potential escalation of tension. As US markets gained after China reaffirmed commitment to resolve trade, we selected a basket of US consumer staples / solid stocks: Coca-Cola (+7.94% since the lows in Dec18), McDonalds (+16.14% since the lows in Dec18) and Apple (+25.90% since the lows in Dec18) to benefit from recent peak in volatility

The below strategy is a 3-year maximum duration providing quarterly exits with decreasing autocall triggers and a potential 16.00% p.a. memory coupon (max payout = 48%) paid if the product early redeems. At maturity qualified investors will benefit from a conditional capital protection (50% European Barrier on the lowest performer)

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 3 Years, unless called
Underlying (WO) Coca-Cola (KO US), Apple (APPL US), McDonalds (MCD US)
Observations Quarterly
Autocall triggers From 100% to 75% (-5% every 2 quarters)
Recall Coupon 16.00% p.a. (memory)
European barrier 50%
Alternative 1 - USD, Athena Airbag (last AC Trigger = EU KI = 50%), Recall Coupon 11.60% p.a. (memory)
Alternative 2 - GBP, Athena, Recall Coupon 13.30% p.a. (memory)
Alternative 3 - EUR, Athena, Recall Coupon 10.95% p.a. (memory)
Alternative 4 - CHF, Athena, Recall Coupon 10.40% p.a. (memory)

Mechanism

Scenario 1:On Q3, if not called before, WO is down by 2% from its initial level (above 95% AC Trigger)
Payoff: Qualified investors get 100% capital back + 3 * 4.00% coupon (16.00% p.a.) = 112%. Product early redeemed

Scenario 2: On Q8, if not called before, WO is down by 17% from its initial level (below 85% AC Trigger)
Payoff: No coupon paid. Product continues

Scenario 3: At maturity, if not called before, WO is down by 20% (above 75% AC Trigger and 50% European Barrier)
Payoff: Qualified investors get 100% capital back + 12 * 4.00% (16.00% p.a.) = 148%

Scenario 4: At maturity, if not called before, WO is down by 30% (below 75% AC Trigger but above 50% European Barrier)
Payoff: Qualified investors get 100% capital back. No coupon paid

Scenario 5: At maturity, if not called before, WO is down by 55% (below 75% AC Trigger and 50% European Barrier)
Payoff: Qualified investors get 45% capital back. No coupon paid

The following graph represents the performance of the 3 underlyings over the last 5 years

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3Y USD 120% Participation on SX5E, 10.80% p.a.

Equities in Europe have been recovering since the beginning of the year with an ongoing tense geopolitical situation and the fear of global growth, market appreciation should run out of steam. The Euro Stoxx 50 Index (SX5E) increased by 19.65% from January to beginning of May. Since the beginning of the month, SX5E decreased by 5.50% and is now slowly recovering

The below strategy allows qualified investors to take advantage of the potential downtrend over the first year (with quarterly observation), with a 10.80% p.a. conditional coupon paid quarterly if SX5E trades quarterly below current level (entering a bearish trend). If such bear trend happens, we may expect a recovery in the index in 3 years. The strategy offers 1.20 times uncapped exposure in 3 years (at maturity) if the index closes above current level. The capital is also conditionally protected with a 70% European Barrier

Such strategy is suitable for qualified investors strongly believing European equity markets might suffer losses next year in that case will get rewarded with a quarterly coupon and if market recovers can be rewarded with an upside appreciating in 3 years

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 3 Years
Coupon Observations Quarterly (Q1, Q2, Q3, Q4)
Conditional Coupon 10.80% p.a.
Coupon Condition If closes below its initial level
Participation Observation At maturity (Y3)
Participation 120% on the positive performance
European barrier 70%
Investor Profile Bearish Speculative over 1Y, Bullish Speculative in 3Y
Alternative 5Y USD, 28.20% p.a. paid quarterly on the first year, 120% participation on the positive performance at maturity (Y5)

Mechanism

Scenario 1: On Q1, SX5E is down by 20% (below its initial level)
Payoff: Qualified investors get 2.70% coupon (10.80% p.a.), product continues

Scenario 2: On Q2, SX5E is up by 10% (above its initial level)
Payoff: No coupon paid, product continues

Scenario 3: At maturity, SX5E is up by 25% (above 70% European Barrier)
Payoff: Qualified investors get 100% capital back + 120% * 25% = 130%

Scenario 4: At maturity, SX5E is down by 15% (above 70% European Barrier)
Payoff: Qualified investors get 100% capital back. No participation

Scenario 5: At maturity, SX5E is down by 35% (below 70% European Barrier)
Payoff: Qualified investors get 65% capital back. No participation

The following graph represents the performance of the underlying over the last 5 years

ma2

5Y USD CLN on iTraxx Main [4-8], 7.20% p.a. guaranteed (*)

Recently, iTraxx spreads have widened (+19.73% in one month on the iTraxx Main 5Y). The iTraxx Main Index has just overtaken its 5-year historical average (average 66.76, actual spread 67.97)

According to Moody’s, European default rates are currently at their lowest levels since 2008, and although they are expecting a moderate increase in the default rate by the end of 2019, so far there have not been any recorded default this year. In the current market environment, there is potential to lock in these rising spreads by selling credit protection on the iTraxx Main index through a Credit Linked Note (CLN) Tranche

The below strategy exposes qualified investors to the Tranche [4 - 8] on iTraxx Main S31 and provides an exposure to the investment grade credit market

The product allows qualified investors to benefit from an annual coupon of 7.20% p.a. (paid quarterly) and a 100% capital redemption at maturity if the number of entities impacted by a Credit Event is less than 4. (*) If 4 or more Credit Events have occurred since the inception, the value of the coupon and the capital redemption will be reduced by 1.44% and 20.00% respectively for each Credit Event

It might still be too early stage to gain exposure to the iTraxx Main, as the spread decreased by 26.88% since the beginning of the year. Such trend can reverse, and timing could be optimized at a later stage to invest in this strategy

Product Parameters

Issuer rating A+
Currency USD
Maturity 5 Years
Underlying iTraxx Main S31
Tranche 2.40%-6.40% [4-8]
Coupon payment Quarterly
Guaranteed Coupon 7.20% p.a. unless credit event
Recovery Fixed at 0%
Settlement European
Investor Profile Sophisticated
If N Credit Events (N > 3): Coupon = Max[7.20% * [1 - (N - 3) / 5], 0%], Redemption = Max[100% - [1 - (N - 3) / 5)], 0%]

Mechanism

Scenario 1: On Q2, the Number of entities impacted by a Credit Event is equal to 0
Payoff: Qualified investors get 1.80% coupon (7.20% p.a.)

Scenario 2: On Q3, the Number of entities impacted by a Credit Event is equal to 3
Payoff: Qualified investors get 1.80% coupon (7.20% p.a.)

Scenario 3: On Q5, the Number of entities impacted by a Credit Event is equal to 4
Payoff: Qualified investors get 1.442% coupon (5.768% p.a.) and capital redemption at maturity is fixed at 80%

Scenario 4: At maturity, the Number of entities impacted by a Credit Event is equal to 3
Payoff: Qualified investors get 100% capital back + 1.80% coupon (2.70% p.a.)

Scenario 5: At maturity, the Number of entities impacted by a Credit Event is equal to 6
Payoff: Qualified investors get 40% capital back + 0.721% coupon (2.884% p.a.)

Credit Event: If a credit event occurs, further coupons are forgone and the CLN will redeem at the final auction settlement price determined by International Swaps and Derivatives Association (ISDA: www.isda.org)

The following graph represents the performance of the underlying over the last 5 years:

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1.5Y USD Athena on Pharmaceuticals, 9.90% p.a. memory

The Pharmaceutical sector has been a source of strong growth, despite the potentially high-risk nature of a business heavily dependent on research, development of new products, and patent protection. The below basket composed by Novartis, Pfizer and Allergan, moved by -8.57%, +17.42% and -57.83% respectively since June 2015

There are some buy signals on these stocks which could be reversed. Uncertainties provide volatility on the above basket which could help build strategies

The enclosed strategy is suitable for qualified investors with neutral/bullish views on Pharmaceutical sector. The structure allows qualified investors to get quarterly exits with a 9.90% p.a. cumulative recall coupon (2.475% p.q.) and a capital protection on the downside up to -45% (leveraged put 55%)

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 1,5Y
Underlyings (WO) NNovartis (NOVN SE), Allergan (AGN UN), Pfizer (PFE UN)
Observations Quarterly
Autocall Trigger decreasing 100% to 87.50% (-2.50% p.q.)
Memory recall coupon 9.90% p.a.
Leveraged put 55%
Investor Profile Neutral/Bullish speculative
Alternatives 2.5Y GBP, Leveraged put 55%, 7.70% p.a. 2.5Y EUR, Leveraged put 60%, 6.60% p.a. 2.5Y CHF, Leveraged put 60%, 6.20% p.a.
Pricing date 26/04/2019

Mechanism

Scenario 1: On Q1, WO is up by 2% from its initial level (above 100% AC Trigger)
Payoff: Qualified investors get 100% capital back + 2.48% coupon (9.90% p.a.). Product early redeemed

Scenario 2: On Q2, WO is down by 15% from its initial level (below 97.50% AC Trigger)
Payoff: No coupon paid, product continues

Scenario 3: At maturity, WO is up by 2% from its initial level (above 87.50% AC Trigger)
Payoff: Qualified investors get 100% capital back + 14.85% coupon (1.5 * 9.90% p.a.)

Scenario 4: At maturity, WO is down by 20% from its initial level (below 87.50% AC Trigger but above 55% Leveraged put)
Payoff: Qualified investors get 100% capital back. No coupon paid

Scenario 5: At maturity, WO is down by 50% from its initial level (below 55% Leveraged put)
Payoff:Qualified investors get 90.91% (50%/55%) capital back. No coupon paid

The following graph represents the performance of the underlyings over the last 5 years:

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1Y EUR RC on EUR CMS 10Y, 3.65% p.a. guaranteed

The European Central Bank (ECB) made no changes to its monetary policy in April. This left interest rates at record-low levels against the backdrop of a sharp cool-off in growth. Some investors are expecting EUR long term rates to not significantly decrease. They could therefore be interested in investing in a bullish short-term structured note on EUR 10-year swaps

The enclosed strategy is suitable for qualified and sophisticated investors with a view on EUR long term rates over one-year horizon. The annual guaranteed coupon is at 3.65% (paid semi-annually) in EUR. On the downside, the capital is protected thanks to a leveraged put / low strike mechanism (50%, 25.30bps)

A constant maturity swap (CMS) is a variation of the regular interest rate swap. The floating portion of the swap is reset periodically against the rate of a fixed maturity instrument, such as a Treasury note, with a longer maturity than the length of the reset period

The main risk is that EUR CMS 10Y fixes below the strike (50%, 25.30bps) at maturity, in which case investors could lose up to 100% of their principal investment. For CMS Linked structures, it should be noted that CMS rates will be affected by several factors and may be extremely volatile (e.g. when compared to Euribor). Economic and market factors will impact the CMS rates too

Product Parameters

Issuer rating AA- (rated by S&P)
Currency EUR
Maturity 1Y
Underlyings EUR CMS 10Y (EUSS10)
Observations Semi-Annually
Memory coupon 3.65% p.a.
Leveraged put 50% (25.30bps)
Spot reference 50.60bps
Investor Profile Neutral Sophisticated
Alternatives 6M, 3.98% p.a. guaranteed 18M, 3.14% p.a. guaranteed
Pricing date 25/04/2019

Mechanism

In all cases, qualified investors get a 3.65% p.a. guaranteed coupon paid semi-annually Scenario 1: At maturity, EUR CMS 10Y is up by 10% from its initial level (above 50% Leveraged put)
Payoff: Qualified investors get 100% capital back + 1.84% coupon (3.65% p.a.)

Scenario 2: At maturity, EUR CMS 10Y is down by 60% from its initial level (below 50% Leveraged put)
Payoff: Qualified investors get 80% (40%/50%) capital back + 1.84% coupon (3.65% p.a.)

The following graph represents the performance of the 3 underlyings over the last 5 years:

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3Y USD Autocall BRC on Italian Banks, 8.80% p.a. guaranteed

Italian banks could benefit from the new TLTRO-III (targeted longer-term refinancing operations) cost potentially going lower. Though, it might not go as low as the deposit rates. This would suggest that the risk premium in Italy should decline with the renewed program, which is beneficial for Italian banks

Italian banks are still more volatile when compared to other European banks. The preferred underlyings picked up for our enclosed strategy are: Unicredit (UCG IM), Mediobanca (MB IM) and Intesa (ISP IM), with YTD performances of +26.38, +29.87% and +22.69% respectively vs SX7E YTD performance of +15.75% and 2018 performances of -37%, -21.70% and -29.56% vs SX7E 2018 performance -33.35%

The enclosed strategy, an autocallable reverse convertible on a basket (WO) of Unicredit, Mediobanca and Intesa offering a guaranteed return of 8.80% p.a. paid quarterly. Qualified investors can benefit from quarterly exits even if the stocks enter a slight bearish trend. At maturity the capital is protected with a 65% low strike (leveraged put mechanism)

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 3Y unless called
Underlyings (WO) Unicredit (UCG IM), Mediobanca (MB IM), Intesa (ISP IM)
Observations Quarterly
Autocall trigger Q1 100%, Q2 95% then -5% every two quarters
Coupon 8.80% p.a. guaranteed
Leveraged put 65%
Max payout 126.40%
Investor Profile Neutral/Bullish speculative
Alternative 3Y EUR, 6.90% p.a. guaranteed
Pricing date 29/04/2019

Mechanism

Scenario 1: On Q1, WO is up by 2% from its initial level (above 100% AC Trigger)
Payoff:Qualified investors get 100% capital back + 2.20% coupon (8.80% p.a.). Product early redeemed

Scenario 2: On Q2, WO is down by -15% from its initial level (below 95% AC Trigger)
Payoff: Qualified investors 2.20% coupon (8.80% p.a.). Product continues

Scenario 3: At maturity, WO is down by 20% (above 65% Leveraged put)
Payoff: Qualified investors get 100% capital back + 2.20% coupon (8.80% p.a.)

Scenario 4: At maturity, WO is down by 40% (below 65% Leveraged put)
Payoff: Qualified investors get 92.3% (60%/65%) capital back + 2.20% coupon (8.80% p.a.)

The following graph represents the performance of the underlyings over the last 5 years:

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1Y USD 75% LS RC on USD 3 Month Libor, 6.50% p.a. guaranteed

Qualified investors expecting the USD 3-Month Libor ($3mL) to remain stable at current levels or potentially decrease moderately in one year could consider the enclosed strategy offering a rather attractive guaranteed return over a less volatile underlying when compared to equities

In one year, the capital is at risk if the $3mL closes 25% below its initial level (low strike 75% equivalent to 1.91991 - 1Y forward level is actually at 2.2013). The annual guaranteed return is at 6.50% p.a. paid at maturity with conditional capital protection thanks to a 75% leveraged put. If the underlying closes below 75%, then the investors receive a value of cash which would be less than initially invested (see below scenarios)

London Interbank Offered Rate is the average interest rate at which leading banks borrow funds from other banks in the London market. Often considered a benchmark, regulators have planned to discontinue the use of it in the coming years

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 1 Year
Underlying USD 3 Month Libor (ref. 2.55988)
Guaranteed coupon 6.50% p.a.
Coupon payment At maturity
Leveraged put 75% (equivalent 1.91991)
Investor profile Neutral sophisticated
Alternative 75% European Barrier, guaranteed coupon 7.90% p.a.

Mechanism

In all cases, qualified investors get a 6.50% p.a. guaranteed coupon paid at maturity

Scenario 1: At maturity, $3mL is up by 10% from its initial level (above 75% Leveraged put)
Payoff: Qualified investors get 100% capital back + 6.50% p.a. coupon

Scenario 2: At maturity, $3mL is down by 30% from its initial level (below 75% Leveraged put)
Payoff: Qualified investors get 93.33% (70%/75%) capital back + 6.50% p.a. coupon = 99.83%

The following graph represents the performance of the underlying over the last 5 years:

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2Y USD 100% KG Call Up & Out on SX7E, 4.00% rebate

The Eurostoxx 50 Index (SX5E) and the Eurostoxx Banks Index (SX7E) are rather positively correlated (0.734) but since end of 2015 the spread between both increased. Since the beginning of 2016, SX5E increased by 6.18% and while SX7E decreased by 25.06%

The environment benefits from the current pricing environment, with at-the-money call options on SX7E trading near 10-year lows. The European Central Bank’s extension of the TLTRO facility rate should be a positive move for the liquidity of the European Banking sector. This also should generate opportunities for a potential recovery – compared to SX5E, in upcoming months

The enclosed strategy referred to as “Up-And-Out Participation Note” provides qualified investors with an attractive exposure to the positive performance of SX7E, provided the knock-out barrier has not been reached throughout the product's lifetime (see scenarios below). If the barrier has been reached, qualified investors will receive the invested capital back and a rebate of 4% at maturity

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency USD
Maturity 2 Years
Underlying SX7E Index
Observations Daily-close
Up & Out barrier 130%
Rebate 4.00%
Capital protection 100%
Final Redemption(if no barrier event) 100% + Max(0%, Performance)
Investor Profile Bullish sophisticated

Mechanism

Scenario 1: At maturity if SX7E up by 25% and never closed above the 130% Up & Out barrier
Payoff: Qualified investors get 100% capital back + 25% participation

Scenario 2: At maturity if SX7E up by 15% but closed at a point above the 130% Up & Out barrier
Payoff: Qualified investors get 100% capital back + 4% rebate

Scenario 3: At maturity if SX7E down by 10% but closed at a point above the 130% Up & Out barrier
Payoff: Qualified investors get 100% capital back + 4% rebate

Scenario 4: At maturity if SX7E down by 10% and never closed above the 130% Up & Out barrier
Payoff: Qualified investors get 100% capital back. No participation

The following graphs represent the performance of the underlying over the last 5 years, and the spread SX5E-SX7E:

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1Y USD 100% KG Double Digital on Tech Spread, 10.00% p.a.

The US-China Trade War is having an impact on the technology sector in both countries. Since September 2018, the below suggested US technology basket (Amazon, Google, Apple, Netflix, Tesla and Nvidia – Long basket EW) has outperformed the Chinese one (Baidu, Tencent Holding and Alibaba Holding – Short basket EW) by 23% on average. Over the last 3.5 years and since the beginning of trade tensions between the US and China, the rolling 1Y outperformance has remained above 15% during more than 75% of the considered period

This strategy is a 12-month duration 100% principal protected note. It provides a potential return of 10% p.a. if both conditions are met. Qualified investors will benefit from attractive correlation pricing levels driven by classic structured product flows

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency USD
Maturity 1 Year
Exposure (spread) Long basket - Short basket
Long basket (EW) Amazon, Google, Apple, Netflix, Tesla, Nvidia
Short basket (EW) Baidu, Tencent Holding, Alibaba Holding
Observation At maturity
Digital barrier 1 Spread ≥ 15%
Digital barrier 2 Short basket ≥ 100% of its initial level
Digital coupon 10.00% p.a.
Capital protection 100%
Investor profile Bullish sophisticated

Mechanism

Scenario 1: At maturity, Spread is above 15% AND Short basket performance is positive
Payoff: Qualified investors get 100% capital back + 10% p.a. coupon

Scenario 2: At maturity, Spread is below 15% BUT Short basket performance is positive
Payoff: Qualified investors get 100% capital back. No coupon paid

Scenario 3: At maturity, Spread is above 15% BUT Short basket performance is negative
Payoff: Qualified investors get 100% capital back. No coupon paid

Final payout formula: At maturity, if Long Basket – Short Basket ≥ 15%, And Short Basket ≥ 100%: Final Redemption = 100% + 10% p.a. coupon
Otherwise: Final Redemption = 100%

The following graph represents the performance of both baskets over the last 5 years:

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New Invest Ideas

There are three new notes for you:


5Y USD Athena Lookback on Global indices, 11.00% p.a. memo

The “lookback” concept enables qualified investors to optimise an entry point. There will be pre-defined observation dates during the lookback period (in the enclosed example 10 months with monthly readings). With the enclosed investment strategy, qualified investors gain an exposure to a basket of global indices (Japan, Europe and US) and will hopefully optimise the return, liquidity and capital protection thanks to the lookback feature

Once the lookback period is over, the lowest reading for each index (Nikkei 225 YTD +10.76%, S&P 500 YTD +15.98%, Euro Stoxx 50 YTD +14.88%) is considered as the initial strike level. Currently the equity markets are at an all time high and some fundamentalists are expressing concerns over growth and sustainability of recovery in some economies. Instead of waiting for a potential dip to occur it can be worth embracing such strategy now, and if equity indices enter a bear market, qualified investors would have a good entry point. Usually these strategies (lookback) are more expensive to build and launch during stressful times in the markets

Qualified investors are looking to capture an annual return of 11% with memory effect (cumulative effect if previously missed, max return 55%), quarterly exits and a capital protection level of 40% on the least performing index in 5 years if no early redemption

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 5 Years unless called
Underlyings (WO) Nikkei 225 (NKY Index), S&P 500 (SPX Index), Euro Stoxx 50 (SX5E Index)
Lookback effect Lowest strike level over the 10 first months
Lookback frequency (closing level) Monthly (10th of each month)
Autocall frequency Quarterly (from Q4)
Autocall trigger 100%
Coupon trigger 100%
Coupon 11.00% p.a. memory
European barrier 60%
Investor Profile Sophisticated Conservative
Lookback effect The strike date is not established at the start of the life of the product but will be chosen as the minimum among 10 strike dates

Mechanism

Scenario 1: The lowest point observed during the lookback is at month 3. At Q4, WO is up by 2% since the lowest strike date
Payoff: 100% capital back + 11% coupon (4*2.75%). Product early redeems

Scenario 2: The lowest point observed during the lookback is at month 8. At the end of Q5, WO is down by 3% since the lowest strike date
Payoff: No coupon paid (but memory effect). Product continues

Scenario 3: At maturity, the WO is up by 5% since the lowest strike date
Payoff: 100% capital back + 55% coupon (5*11%)

Scenario 4: At maturity, WO is down 30% since the lowest strike date
Payoff: 100% capital back. No coupon paid

Scenario 5: At maturity, WO is down 45% since the lowest strike date
Payoff: 55% capital back. No coupon paid

The following graph represents the performance of the 3 underlyings over the last 5 years:

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2Y USD AC BRC on Royalty Gold companies, 8.00% p.a. guaranteed

Royalty Gold companies provide upfront capital to gold mining producers to help with the expenditures of bringing the mine into production. In exchange for providing this upfront capital, they receive a royalty on future production and an excellent return on investment especially if the commodity price increases. In case qualified investors are looking to benefit from a potential appreciation of gold and mining prices, gaining an exposure to Gold Royalty companies could be a solution

Royal Gold (2018 +2%, YTD +8.07%), Franco Nevada (2018 -10.65%, YTD +6.31%) and Sandstorm Gold (2018 -8.53%, YTD +19.96%) are considered as the most popular royalty gold companies. We built a strategy whereby the return is guaranteed 8.00% p.a. paid quarterly. Qualified investors could benefit from quarterly exits should the least performing share trades at or above current level. After 2 years (in case the investment does not terminate earlier), investors’ capital is protected up to 35% downside level (observed in 2 years’ time). We can use different parameters to build different strategies on this exposure

We are currently looking into different strategies offering our qualified investors an exposure to mining (see enclosed) and energy sectors (below in “Alternative”). The timing might not be perfect now but a close follow up on these sectors could prove fruitful. We are entering earning seasons: 01st of May for Royal Gold, 07th of May for Sandstorm and 08th of May for Franco-Nevada

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency EUR
Maturity 2Y unless called
Underlyings (WO) Royal gold (RGLD UW), Franco Nevada (FNV UN), Sandstorm Gold (SAND UN)
Frequency Quarterly
Guaranteed coupon 8.00% p.a.
Autocall trigger 100%
European barrier 65%
Investor Profile Bullish Speculative
Alternatives WO (Chevron, BP, Exxon), 8.00% p.a. guaranteed, European Barrier 56.50%

Mechanism

Scenario 1: On Q1, WO is up by 2% from its initial level (above 100% AC Trigger)
Payoff: Qualified investors get 2% coupon (8% p.a.). Product early redeems

Scenario 2: On Q2, WO is down by 2% from its initial level (below 100% AC Trigger)
Payoff: Qualified investors get 2% coupon (8% p.a.). Product continues

Scenario 3: At maturity, WO is down by 20% (above 65% European Barrier)
Payoff: Qualified investors get 100% capital back + 2% coupon (8% p.a.)

Scenario 4: At maturity, WO is down by 40% (below 65% European Barrier)
Payoff: Qualified investors get 60% capital back + 2% coupon (8% p.a.)

The following graph represents the performance of the 3 underlyings over the last 5 years

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2Y EUR RC on TRYEUR, 10.00% p.a. guaranteed

Following JP Morgan’s recommendation to short the Turkish Lira, Erdogan hiked up interest rates to “kill the shorts” on his currency

TRYEUR reached its lowest level ever on the 29th of September 2018 (0.1422). The currency is currently at 0.15232 (+7.80% since the 29th of September). The actual TRYEUR level and political situation of Turkey could allow qualified investors to benefit from a potential good entry point

The enclosed strategy is suitable for qualified investors willing to have an exposure to the TRYEUR allowing them to benefit from 10% p.a. guaranteed coupon in EUR over 2 Years, and a capital protection with 20% buffer. Capital is at loss only when the exchange rate goes below 0.0529. Currently the forward are showing a TRYEUR at 0.0950

This strategy is only suitable for qualified investors with the view that the currency should not depreciate more than 20% over 2 years

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency EUR
Maturity 2 Years
Exposure TRYEUR
Guaranteed coupon 10% p.a.
European Barrier 80%
Leverage on the downside 1.375
Payout at maturity 110% - 1.375 * Max (80% - Performance; 0%)
Investor Profile Bullish Sophisticated
Delivery Cash

Mechanism

Scenario 1: On Y1, TRYEUR down by 10% from its initial level
Payoff: Qualified investors get 10% p.a. coupon

Scenario 2: At maturity, TRYEUR down 15% from its initial level (above European barrier = 80%)
Payoff: Qualified investors get 100% capital back + 10% p.a. coupon

Scenario 3: At maturity, WO down 25% (below European Barrier = 80%)
Payoff: Qualified investors get 110% - 1.375 * Max(80% - 75%; 0%) = 103.125% capital back

Scenario 4: At maturity, WO down 50% (below European Barrier = 80%)
Payoff: Qualified investors get 110% - 1.375 * Max(80% - 50%; 0%) = 68.75% capital back

The following graph represents the performance of the underlying over the last 5 years:

 gr21


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