Provider Q&A: Morgan Stanley

Currently you are offering products with a 50% barrier on the FTSE. How are these barriers constructed? Soft protected products are put together in a similar way to fully protected products – ie, with a purchase of a zero coupon bond to provide capital protection. However there is an additional sale of a put option, which activates if and when the pre-determined index level is hit. Once this index level is reached, the client’s capital becomes at risk. A put option is the right to sell an underlying asset at a pre-determined price (here, the index level on the plan start date). As sof...