Structured Product Evaluation Report

Investment Analysis: 26.00% p.a. Multi Barrier Reverse Convertible (Worst-of) on Eli Lilly & Moderna

ISIN: CH1607599219 Structure: Worst-of Barrier Reverse Convertible, issuer-callable Currency: USD

Headline Simulation Results

16.55%

Expected annualized return

17.20%

Probability of a negative return

-44.07%

99% confidence VaR (1-year)

13.40%

Expected total return over realized holding period

11.39 mo

Average holding period

Metric (annualized)	Result
Expected annualized return	16.55%
Probability of a negative return	17.20%
99% confidence VaR (1-year)	-44.07%
Expected total return over realized holding period	13.40%
Average holding period	11.39 months

Across 10,000 simulated scenarios the note most often delivers a coupon-and-par outcome, but carries a meaningful left tail: in roughly 1 in 6 paths the investor ends with a loss (driven by a barrier breach combined with a sharp decline in the worst-performing stock), and the 1%-worst outcome is around -44.07% annualized.

What This Product Is (in plain terms)

This is a yield-enhancement note linked to the worse of two US pharmaceutical/biotech stocks — Eli Lilly (LLY) and Moderna (MRNA). The investor collects a high 26% annual coupon (paid quarterly) in exchange for accepting downside risk on the two shares.

Coupons are always paid while the note is alive (roughly USD 325 per USD 5,000 per quarter).
Capital protection is conditional. If neither stock ever falls to or below 49% of its starting level during the note's life — i.e. no "barrier event" — the investor gets the full principal (par) back at maturity, plus all coupons.
If a barrier event occurs (at least one stock trades at or below 49% at some point) and, at maturity, the worst stock is below its starting level, the investor does not get par — they receive that worst-performing stock (or its cash equivalent) at a value equal to its final percentage of the start. In other words, they absorb the loss below par.
If the barrier is breached but the worst stock recovers to at or above its starting level by maturity, the investor still gets par back.
The issuer may call the note early on any quarterly observation date (from ~6 months). When called, the investor receives par plus that period's coupon, and the note ends. Upside is capped at coupons + par — the investor never participates in a rally in the shares.

In short: the investor is paid a large coupon to sell downside protection on two volatile stocks, with a buffer down to 49% and a cap on all upside.

Key Risk & Return Statistics — Product vs. Benchmark

The benchmark is an equal-weight basket of LLY and MRNA (total return, i.e. including dividends), evaluated over the same holding period as each simulated note path.

Metric	Structured Product	Underlying Basket (total return)
Expected annualized return — mean	16.55%	38.27%
Expected annualized return — median	25.25%	22.30%
Expected annualized volatility	19.95%	72.59%
Probability of loss	17.20%	31.11%
99% confidence VaR (1-year)	-44.07%	-48.48%
Mean total return over realized holding period	13.40%	23.99%
Risk-free rate (1-yr)	3.69%	3.69%

Reading the two annualized means carefully. The basket's mean annualized return (38.27%) is much higher than the product's because the underlying has an extreme upside tail (its best 1% of paths exceed +200%) and because the issuer tends to call the note exactly when the shares have rallied — those short, strong-market paths are then annualized aggressively. On a median basis the picture is far more balanced (25.25% product vs 22.30% basket): the product trades away the upside tail (its maximum annualized return is about +26%) in return for a much tighter, coupon-supported distribution and lower volatility.

Simulation Charts

1. Outcome scatter — product vs. underlying (each dot = one scenario, total return)

Both axes show total return over the simulated holding period. The product's total return is capped (dots flatten near +30–35%, i.e. par plus the maximum coupon stack) no matter how far the basket rises, while it still participates in downside once the barrier is breached. Colour = years held.

Figure 1 — Total return: structured product vs. underlying basket per scenario

2. Distribution of annualized returns — Underlying basket

Very wide and right-skewed: the benchmark spans large losses to very large gains (1%–99% of paths fall roughly between −49% and +297% annualized).

Underlying basket histogram of annualized returns

Figure 2 — Annualized return distribution: underlying basket

3. Distribution of annualized returns — Structured product

Much more concentrated: most outcomes cluster around a coupon-supported positive return, with a distinct left tail for barrier-breach/loss scenarios.

Structured product histogram of annualized returns

Figure 3 — Annualized return distribution: structured product

4. Scenario probabilities

Worst-case (a loss) 17.20%
Best-case (annualized return above 10%) 81.54%
Beats the risk-free rate (3.69%) 82.21%

Figure 4 — Scenario probabilities

5. Risk / return profile

Relative to the underlying basket, the product sits at a markedly lower volatility with a comparable-or-better median return — but well below the basket's tail-driven mean.

Figure 5 — Risk / return profile comparison

6. Return distribution comparison (box plot)

Figure 6 — Box plot comparison of return distributions

7. Holding-period and coupon-count probabilities

The issuer-call feature makes the holding period variable. Roughly 47.67% of paths are called early; the rest run to maturity.

Figure 7a — Holding period distribution

Figure 7b — Number of coupons received

Investment Commentary

Favourable characteristics observed in the simulation

High, regular income. The 26% p.a. coupon is paid while the note is alive, and it is paid even in scenarios where the shares fall modestly — income is not contingent on performance.
Conditional 49% buffer. A barrier as low as 49% means each stock can fall almost by half before principal is at risk. In the simulation, a barrier event occurred in only about 21.41% of paths, and a loss requires a breach to coincide with the worst stock finishing far enough below its start that the principal impairment exceeds the coupons collected.
Lower volatility, smoother outcome. Annualized volatility of ~19.95% is far below the basket's ~72.59%, and the median outcome compares well to the underlying.
Frequent early exit at par + coupon. In nearly half of scenarios the note is called within ~6–12 months, returning principal plus accrued coupons early, which lifts the realized annualized return.

Trade-offs to be aware of (characteristics, not advice)

Upside is fully capped. Any rally beyond the coupons is forgone (product max ≈ +26% annualized vs the basket reaching +200%+ in its best paths).
Negative convexity. The issuer calls in strong markets but keeps the note outstanding in weak ones — so the investor systematically stays exposed to the bad scenarios and is exited in the good ones.
Worst-of exposure with a very volatile name. MRNA's volatility is historically several times LLY's, so the worst-of payoff is effectively dominated by MRNA's downside; a single sharp MRNA drawdown can push the note into a loss even if LLY performs well.
Tail risk remains. The 99% VaR of about -44.07% shows that barrier-breach scenarios can produce substantial losses close to the worst stock's decline.

Annualized figures for short holding periods can appear extreme; total return (13.40% mean product over a ~11.4-month average holding period) and the holding period should be read together. This analysis is a quantitative illustration based on simulated market paths and does not constitute investment advice.