A basket certificate is not based on a specific underlying instrument, but rather on a basket of several financial instruments, most of the time a number of specific stocks.
Issuers continually post prices at which they will buy or sell their own products, thereby ensuring the tradability of those securities even if there is little or no turnover taking place otherwise in the marketplace. At the current "bid" price, you can sell a structured product such as a warrant or certificate to the issuer at any time during its term to maturity. In most instances, the bid price is somewhat lower than the ask price.
The Black-Scholes model is one of the first and most famous models for calculating the fair price of an option. Myron Scholes and Robert C. Merton received the 1997 Nobel Prize in Economics for their development of this model (at that point, Fisher Black had already passed away). Meanwhile, the original form of the Black-Scholes model has been developed further by many experts.
At maturity, the holder of a bonus certificate receives payment of at least an amount equal to bonus level, provided a specified price level (safety threshold) has never been touched or penetrated during the product's term to maturity. However, if the underlying instrument experiences a sharp increase in price, the amount ultimately paid out on a bonus certificate can also be higher.
|Bonus outperformance certificate
The repayment profile of a bonus outperformance certificate corresponds to that of a normal bonus certificate. However, it enables the investor to participate disproportionately in price increases that exceed a predetermined level. In turn, the distance to the safety level is generally less than for a comparable classic bonus certificate.
The breakeven level, i.e. profit threshold, indicates how far the underlying instrument would have to rise in order for the holder of a structured product to avoid a loss at maturity. Because most investors do not hold their warrants through to the expiry date but instead desire to sell them at a profit during the term of the warrant, the breakeven level in this regard plays a lesser role.