Structured Product Evaluation

The product is a yield-enhancement structure: most of the time it simply pays its fixed coupon, but it carries a tail risk of capital loss if the worst-performing stock breaches the 49% barrier and finishes below its initial level. The simulation shows an attractive expected return with a moderate probability of loss, driven by the deep 49% barrier.

• The note pays a fixed 22.00% per year coupon in four quarterly instalments (5.50% each), regardless of how the three shares perform during the term.
• At maturity you normally get your full 100% nominal back — unless any one of Dell, Microsoft or SanDisk ever trades at or below 49% of its starting level at any point during the year (a "barrier event").
• If that barrier is never touched, you receive par (100%) at the end. If it is touched, your redemption becomes linked to the worst-performing of the three shares: if that worst share ends at or above its starting level you still get par; if it ends below its starting level you effectively receive that share's value − i.e., you participate in its downside, with no participation in any upside.
• The issuer additionally holds a call right: it may redeem the note early (at the two scheduled call dates around month 6 and month 9), in which case you receive par plus that period's coupon. Upside is therefore capped.

Outcome distribution

• Called early at ~month 6: 16.25% of simulations
• Called early at ~month 9: 7.25% of simulations
• Held to maturity (month 12): 76.50% of simulations
• Continuous barrier breached during the year: 7.55% of simulations

Pros

• High headline yield: a 22.00% p.a. coupon in a CHF (quanto) format, well above the CHF risk-free rate (approximately −0.05%).
• Deep protective barrier: the 49% barrier gives roughly a 51% cushion on each underlying before the capital-protection feature is lost; in the simulations the barrier was breached in only ~7.5% of paths.
• Favourable risk/return shift: the structure converts the basket's ~24.8% volatility into a ~13.6% product volatility while raising the expected return (18.18% vs 9.20%), at the cost of capped upside.
• Positive expected carry: the expected return comfortably exceeds the risk-free rate (92.51% chance of doing so), reflecting the coupon earned while the barrier remains intact.
• Quanto CHF: removes direct USD/CHF currency risk for a CHF-based investor.

Cons / risks to note

• Worst-of exposure: the downside is driven by the single weakest of the three names (including the highly volatile SanDisk), so diversification benefit is limited at maturity.
• Full downside, capped upside: on a barrier breach with the worst name below its initial level, the loss is linear in that stock's decline, with no offsetting upside participation.
• Tail risk: the 99% VaR of −36.64% shows that a severe, correlated equity sell-off (which would breach the barrier) can produce a substantial one-year loss.
• Call risk: early redemption (projected in ~23.5% of paths) truncates the coupon stream and forces reinvestment; the effective yield is therefore slightly below the headline in those scenarios.
• Issuer & liquidity risk: the note is an unsecured obligation of the issuer (Leonteq, Fitch BBB−), exposed to the issuer's credit risk.