An Analysis On Earnings And Risk Of A Structured Financial Product "Gather China"Issued By HSBC

Structured financial product is a new kind of investment tool, which combines fixed income securities and financial derivative. It appeared in America in the1980s firstly and it is the fruit of financial innovation. Our country introduced it a little late but it developed rapidly. For its principle and function, structured financial product has lasting vitality and huge space of development. Due to the complex terms and varied underlying asset of structured financial product, it is difficult for common investors to judge the earnings and risk of the product.This paper takes a structured financial product issued by HSBC as a case. On the one hand, this product is broken into fixed-income securities and option. Then use the methods of discounted cash flow and Monte-Carlo simulation to calculate the earnings of each part, finally sum them up to the total revenue. Through the calculation, this product is issued at a premium, the maximum possible actual loss is5.83%, the probability of actual yield which can be higher than3%is43.7%. On the other hand, this paper also analyzes the risk of the products qualitatively. Through this analysis, the product has some risk of market and more risk of liquidity.Finally, considering with investor’s own factors, such as risk preference, risk tolerance and so on, this paper points out the investors who are suitable for this product and the issues that need investors’attention when investing structured financial product.