Discount Certificates

Inhaltsangabe:Introduction:

In 1985 Thomas Zwirner of HSBC Trinkaus invented the Discount Certificate by copying an investment strategy of professional investors.

Now there are over 100,000 certificates traded on the European Warrant Exchange (EUWAX). About 80% are discount certificates. Many Banks promote discount certificates as a safer and more profitable investment than a direct investment in stocks. However, when Lehman Brothers has filed bankruptcy in 2008 many investors lost their money invested in Lehman certificates. Investors may now ask themselves the question if certificates and especially discount certificates are a true alternative to a stock investment.

The following work will answer this question. It is structured as follows: Chapter 2 describes basic information about discount certificates; it also provides information on the markets for discount certificates. Chapter 3 will identify and evaluate the risks and opportunities of a direct stock investment and a investment in discount certifi-cates. Chapter 4 evaluates the behavior of discount certificates and stocks in differ-ent market scenarios by using a fictive example.

In chapter 5 possible strategies for an investment in discount certificates are given by the author and evaluated on their risk and opportunities, while chapter 6 concludes.

Since there are many different types of discount certificates, this work will focus on the discount certificates with an underlying of one share of the respective company. Inhaltsverzeichnis:Table of Contents:

Executive Summary1

Table of Contents2

List of Abbreviations4

List of Figures4

List of Tables4

1.Introduction5

2.The Discount Certificate6

2.1Definition and General Information6

2.2Markets for Discount Certificates7

3.Differentiation of Discount Certificates and stocks9

3.1Opportunities and risks9

3.2Evaluation12

4.Behavior of Discount Certificates in Different Market Scenarios13

4.1Assumptions13

4.2Five Market Scenarios14

4.2.1The Growth Scenario14

4.2.2The Moderate Growth Scenarios16

4.2.3The Stagnation Scenario18

4.2.4The Moderate Decline Scenarios20

4.2.5The Decline Scenario22

4.3Special considerations when investing in discountcertificates24

4.4Evaluation and Critical Review25

5.Strategies for investing into Discount Certificates27

5.1Classic Strategies27

5.2Unconventional Strategies28

5.2.1The short maturity strategy29

5.2.2The low volatility strategy31

6.Conclusion32

Reference List33 Textprobe:Text […]



Inhaltsangabe:Introduction:

In 1985 Thomas Zwirner of HSBC Trinkaus invented the Discount Certificate by copying an investment strategy of professional investors.

Now there are over 100,000 certificates traded on the European Warrant Exchange (EUWAX). About 80% are discount certificates. Many Banks promote discount certificates as a safer and ...