investors-overpay-for-guaranteed-accumulators

Investors over-pay for guaranteed accumulators

RBS analysis claims that private banks are stacking trades heavily in their own favour when they sell guaranteed accumulators with low knock-outs.
The favourite structured product in the private banker's arsenal is a lot more expensive than it looks, according to research by RBS. Guaranteed accumulators have proven to be a real winner lately but RBS' analysis suggests that private banks are not pricing them at the optimum level.

According to the findings, guaranteed accumulators on stocks with low volatility and low forward prices should ideally knock out 104%-105%, or roughly the same level as regular accumulators, and at about 108% for stocks with high volatility and high forward prices. In practice, private banks tend to sell guaranteed accumulators with much lower knock-outs.

Investors in share accumulators buy a certain amount of stock at a...
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