Banks tweak Euro Stoxx autocalls to cut concentration risks

Changes to popular structured products aim to help dealers reduce hedging costs, but will investors make the switch?

The Chinese stock market’s Black Monday of August 24, 2015 wreaked havoc on Korean structured products desks. In the aftermath, a product developer at one investment bank in London had an idea. The bank could structure an investment that worked just like the autocallable notes that were so popular with retail investors, but without the sensitivity to correlation between stock indexes that had caused a large amount of dealers’ pain during the downturn.

The new product contained a flaw, however,

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