In today's low interest rate environment, full capital protection is expensive. This has led to an increase in the issuance of Structured Capital At Risk products, or SCARPS, most of which include a 'soft protection' feature.
Downside protection on structured products in the UK retail market typically falls into two categories; fully capital protected products have no downside exposure to the underlying asset, while ‘soft protected’ products have full downside exposure if markets fall by more than a set amount. Here we examine the difference between these two types of soft protection. We also look at some historical analysis to see exactly how effective each type of soft protection has been over time. Choice of barrier Soft protected products return investors’ capital in full at maturity provided that ...
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