Analysis of Autocallable Notes Who reap the benefits? The issuer, facilitator, distributor, or the investor?

Abstract

Autocallable structured products are complex instruments incorporating features and conditions that make them difficult to assess for potential investors. Despite this, they have become one of the most popular structured products in Norway. A potential reason is that many investors believe that these notes offer a high fixed coupon combined with limited risk. Finance experts do not share this belief suggesting that investors of these products are either ignorant or idiots. In this thesis we analyse two autocallable notes offered in the Norwegian market. Our analysis suggest that investors pay price premiums of ca. 50% relative to the present value of the notes. The products have a high probability of negative and strong negative returns. In addition, the sales documents of these products appear biased. Based on this, it seems like the benefits of these notes are not reaped by the investor, but by the issuer, facilitator, and distributor.