Discount and Bonus Certificates

Paper Summary:

This paper describes in detail discount certificates and bonus certificates. It provides some general information and features of certificates and discusses the engineering and financing of the certificates. The paper then examines the advantages and risks of using these certificates and it then provides a practical example to explain the concept.

Table of Contents:
List of Tables
List of Abbreviations
Introduction
Discount Certificates
General Information
Discounts
Caps
Engineering
Advantages and Risks
Example
Key Figures
Interpretations
Explanations
Bonus Certificates
General Information
Bonus
Barrier
Engineering and Finance
Advantages and Risks
Example
Key Figures
Interpretations
Explanations
Summary and Conclusions

From the Paper:

"Both certificate types are constructed on the basis of an underlying value and some kind of option to finance the mentioned securities as well as benefits. Certificates are sold like share at the stock exchanges in Frankfurt and Stuttgart, as well as through direct trade. Emitter like ABN AMRO sets everyday prices for the products to give liquidity for trade to the investors. There are two different prices offered, the bid and the ask price. The spread in between will finally be the profit for the emitter. Furthermore they make profit through the time value of put options. Offering certificates bears nearly no risk for the emitter. Discount certificates are based on an adverse development that equilibrates any development in the market."

Sample of Sources Used:

• ABN AMRO (09/2006) "Zertifikate - Discount, Bonus, Short Bonus und Outperformance Zertifikate" available from: http://www.abnamrozertifikate.de/MediaLibrary/Document/PDF/ProductTypeDocuments/29/Discount_Bonus_ShortBonus_Outperformance.pdf
• ABN AMRO (21.02.2007) "Bonus Zertifikate - Anlagen mit Bonus Puffer" available from:http://export.abnamrozertifikate.de/pdf/documents/productbrochure/ProduktbroschuereBonuszertifikate.pdf#pagemode=none&zoom=100
• ABN AMRO (14.12.2007) "Produkte" available from: http://www.abnamrozertifikate.de/DE/Showpage.aspx?pageID=35&ISIN=NL0000802320http://www.abnamrozertifikate.de/DE/Showpage.aspx?pageID=35&ISIN=DE000AA0RMN9
• BNP Paribas (20.09.2006) "Discount Zertifikate - Im gunstigen Einkauf liegt ihr Borsenerfolg" available from: http://derivate.bnpparibas.com/de/Category.aspx?Download=warrants/de/doc/Discount_Broschuere.pdf
• BNP Paribas (10/2007) "Warrants und Zertifikate" available from:http://derivate.bnpparibas.com/de/Monthly.aspx?Download=warrants/de/doc/wz_1007.pdf

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