Structured Product Evaluation — Callable Multi Barrier Reverse Convertible on Nestlé, Novartis & Roche

Monte-Carlo based assessment · 10,000 simulated paths · CHF-denominated, Leonteq (guaranteed by PostFinance)

Headline Simulation Results

5.58%

Expected annualized return

13.09%

Probability of negative return

−15.95%

99% confidence VaR (1 year)

Metric (annualized)	Value
Expected annualized return	5.58%
Probability of negative return	13.09%
99% confidence VaR (1 year)	−15.95%
Expected annualized volatility	6.01%
Probability of outperforming the risk-free rate	86.92%
Expected holding period	18.43 months (1.54 years)
Expected total return over the realized holding period	7.83%
Maximum achievable annualized return (cap)	8.00%

Because the product can be redeemed early, the total return is reported together with the annualized return and the average holding period. Each quarter the note pays 2% of notional (CHF 20.00 per CHF 1,000) for as long as it is outstanding, with capital returned at par; the average simulation received 6.14 of the 8 quarterly coupons (CHF 122.80 per CHF 1,000).

Basic Product Information (plain language)

What it is: a 2-year, CHF-denominated yield-enhancement note issued by Leonteq (guaranteed by PostFinance) that pays a fixed 8.00% p.a. coupon, paid quarterly (CHF 20.00 per CHF 1,000).
Underlyings: the worst-of three Swiss blue chips — Nestlé (NESN), Novartis (NOVN) and Roche participation certificates (ROP).
How the coupon works: the coupon is paid unconditionally every quarter, whatever the underlyings do.
How the capital works (the "barrier"): as long as none of the three underlyings ever trades at or below 69% of its starting level (observed continuously) during the life of the note, the investor gets 100% of capital back at maturity. If that 69% barrier is breached, the investor no longer receives par: if the worst-performing underlying is below its starting level at maturity, the investor is delivered that worst-performing share (worth less than par); if it is back at or above its starting level, the investor still receives par.
The call feature: the issuer has the right (not the obligation) to redeem early at par + the then-current coupon on any of four quarterly observation dates (months 12, 15, 18 and 21). This caps the investor's upside if markets rally and shortens the life of the note.
Upside is fully capped: the investor never receives more than par plus the fixed coupons; there is no participation in any rise of the underlyings.

Key Statistics

Statistic (annualized)	Structured Product	Underlying basket (total return)
Expected return	5.58%	11.80%
Expected volatility	6.01%	12.68%
Probability of loss	13.09%	18.08%
99% VaR (1 year)	−15.95%	−12.96%

The benchmark is an equal-weighted basket of the three underlyings (Nestlé / Novartis / Roche) with its dividends added (average dividend yield ≈ 3.28%). Consistent with the "same-horizon" convention, the benchmark is measured over the same number of months that each simulated product position was held — since the note is redeemed early precisely when the underlyings are up, this flatters the benchmark's annualized figure somewhat.

Simulation Charts

Final return: product vs underlying basket

Each point is one of 10,000 simulations. The product's return is squeezed between the fixed-coupon floor and the fully capped ceiling, while the underlying basket has a much wider spread; points below the dashed 1:1 line in the left half show where the barrier bites and the product underperforms the basket.

Underlying basket — annualized return distribution

Structured product — annualized return distribution

Scenario probabilities

The product loses money in 13.09% of simulations, beats the risk-free rate in 86.92%, and reaches its capped best case (a first-date call, i.e. exactly 8.00% p.a.) in 36.12% of paths. It can never exceed 8% p.a. because upward participation is fully capped.

Risk vs return

Annualized return comparison (box plot)

The structured product's distribution is tightly clustered just under 8% with a small downside tail; the underlying basket has a similar median but far wider dispersion in both directions.

Box plot of annualized return comparison

Holding period and coupon profile

Pie chart of holding period distribution

The note is called early in 54.66% of simulations (most often at the very first observation, month 12) and runs the full 24 months in 45.34%; in 14.18% of paths the 69% barrier is breached, which is when coupons continue but capital can be impaired.

Investment Commentary

Strengths

High, unconditional income: an 8.00% p.a. quarterly coupon is substantial relative to a CHF risk-free rate that is currently close to zero, and it is paid regardless of how the underlyings perform.
Conditional capital protection: a deep 69% barrier on large, defensive, dividend-paying Swiss defensive names means the investor keeps par in the large majority of scenarios (≈86% of paths end with no capital loss).
Low realized volatility: the combination of unconditional coupons and conditional protection produces an annualized volatility of only ~6.0%, roughly half the basket's.
Frequent early redemption: in over half the paths the issuer calls the note early, returning par plus the coupons accrued, which lifts the annualized return.

Things to watch

Fully capped upside: with no participation in the underlyings' gains, the best possible outcome is 8.00% p.a.; the issuer's call reinforces this cap by ending the note exactly when markets are strong.
Worst-of barrier risk: the barrier is monitored continuously and applies to the worst-performing underlying, so a single name dipping to 69% is enough to switch off the protection. In the downside tail the product can underperform an equal-weighted basket — its 99% VaR (−15.95%) is worse than the basket's (−12.96%) — because damage is concentrated in whichever underlying falls hardest.
Issuer/guarantor credit exposure: the coupons and redemption depend on Leonteq (guaranteed by PostFinance).
Return vs benchmark: in expectation the product delivers a lower annualized figure than simply holding the basket, in exchange for the coupon certainty and much lower volatility; the gap reflects the cost of the downside protection and the issuer's call option.

Simulation basis: 10,000 Monte-Carlo paths (GJR-GARCH(1,1) with Student-t innovations) calibrated to ~20 years of monthly data for Nestlé, Novartis and Roche; barrier approximated by monthly monitoring; Swiss risk-free rate ≈ −0.05% (1-year average of the 3-month interbank rate); equity risk premium 6%; equal-weighted-basket benchmark with dividends added (≈3.28%). Figures are model-based estimates, not guarantees.