Our Country Commercial Bank Structured Financial Products Design Research

Since China Everbright Bank introduced structured financing business of foreigncurrency in2004，China’s banking industry ushered in development of structured financialproducts. Structured financial products linked fixed-income securities with underlyingassets by financial derivative contracts，the high profitability and flexibility has attractedmany investors.Though structured financial products started late in China, it’s pace of development isastonishing. The number and size of issued products growed rapidly in the past a few years.It has become the new growth point of bank profit. With the increase in wealth of theinhabitants, the traditional financial products like bonds and stocks can not meet theinvestors’ demand of value increase of assets. People’s financial needs become more andmore various. The characteristics of structured financial products let it can be createdunlimited times in theory and have a huge space for development, a different product canbe produced every time.In tne early2008, the high yield image of structured products was changed becausesome products get zero income on maturity day. And investors began to have a rationalview of such products. The market of structured financial products has developed rapidlyin China, but still not perfect. The problem of lack of innovation and homogenization ofproducts is serious. Risk hedging is difficult as commercial banks are lack of soundinternal control mechanisms and risk management mechanisms. To solve such variousproblems, it’s important to improve the level of personalized products, to strengthen therisk control capability and product pricing capability of commercial bank.This thesis outlined the basic connotation and development of structured financialproducts, classified the products on different standards. The second part researched thedesign principles of structured financial products from three aspects like design process,design elements and risk-return characteristics. The third part researched the basicprinciples and models of the product pricing which is the key progess of product design.The last part pointed out the problems in the market of structural financial products, andput forward a number of development proposals.