Equities Management & Services

Equity Derivatives Structuring

J.P. Morgan's Equity Derivatives Structuring draws from a broad selection of strategies and products in creating bespoke risk management solutions specific to the client’s risk-reward profile. We provide exotics payoffs and cross-asset solutions for clients ranging from pension funds and insurance companies, to private banks, retail banks and asset managers.

The
 Equity Derivatives Structuring group offers tailor-made solutions for clients drawing from the trading and risk management expertise of the entire EDG Trading platform. The primary function of EDG
Structuring is to provide clients with the desired product payoff and underlying exposure, with a focus on ensuring seamless ongoing product maintenance. Structuring uses risk management and trading expertise across trading desks, customizes solutions for institutional clients of various jurisdictions and designs new products for investors with different risk appetites.

The team is offering the following solutions:


Tradable Indices

Tradable indices are the creation and development of new tradable assets, on which J.P. Morgan can then write derivatives – either directly to clients or via notes or funds.

The offering has built up since 2005 around J.P. Morgan's research-led systematic trading rules, both in equities and across assets, but encompasses a broad range of simple-to-complex indices, from beta access products to sophisticated and complex strategies.

These indices offer multiple benefits for clients and investors: 

  • Access to strategies and indices that would be too expensive, complex or cumbersome to implement themselves
  • The ability to get delta-1, leveraged or capital protected exposure to these indices

EDG’s Proprietary index business covers multiple forms of product:

  • Non-discretionary strategies and indices
  • Bespoke strategies put together for individual clients (which could be for one institution or for a distributor who wants to “white-label” a strategy)
  • Strategies with discretionary input (i.e., “managed”)

 

Equity Payoffs

Equity Payoffs focuses on the creation, design and pricing of both new and existing products in the core equity derivatives space, with the principal aim being to show relevant ideas and trades actively to a client base ranging from hedge funds to retail distributors:

  • J.P. Morgan offers a broad and comprehensive pricing and risk management capability, meaning that, with the appropriate focus, interesting and profitable business opportunities can be created
  • Themes and payoffs covering stocks, indices and across assets
  • Growth and yield enhancement trades relevant to structured institutional, retail and high-net-worth investors
  • Hidden asset opportunities in volatility, correlation, dividends and skew, targeted at sophisticated institutional clients  

Fund Derivatives

The fund-linked derivatives comprise both asset-side and liability-side transactions linked to hedge funds, mutual funds and other managed underlyings.

Which solutions do we offer through Fund Derivatives?

Asset Side

  • Principal-protected products: using zero coupon and call option on benchmarked mutual funds or using Constant Proportion Portfolio Insurance (CPPI) technology for fund of hedge funds and non-benchmark mutual funds
  • Leverage products
  • Delta-1 products notably for access/operational infrastructure

Liability Side

  • Liquidity and leverage facilities to fund of hedge funds and institutional investors (in Variable Funding Note format)
  • Financing of institutional clients’ fund holdings through Total Return Swap (TRS) structures

Strategic/Complex Structuring

Strategic/Complex Structuring centers on the structuring and execution of transactions of a complex and multi-faceted nature.

The strategic institutional business centers on the structuring and execution of transactions of a complex and multi-faceted nature.

This product line typically covers both “push” and “pull” types of transaction that involve a more strategic partnership with a client (as opposed to a “quote and trade” type of transaction).  The solutions are being developed:

  • In areas where J.P. Morgan has identified a need and opportunity that would result in derivative transactions involving long lead times, multiple areas of structuring experience and resources etc – for example, retirement propositions, unit linked product development, regulatory change
  • Or, as Derivative transactions resulting from dialogue and partnership with clients around solving a particular problem, e.g. strategic hedge where design needs to factor in economic solvency, regulatory capital, accounting treatment etc

Typical opportunities in this space are notably relevant for Insurance and Pensions:

  • Design of replacement for traditional insurance retirement products, giving attractive propositions for investors whilst minimizing economic and solvency risk
    • Flex Protect is designed as a full market risk hedge for policy by policy protected products
    • P80 in an open-ended protected equity-linked investment locking in 80% of max NAV
    • Protected Income is a capital efficient means of offering protected income linked to equity performance
  • Derivatives and funds linked to capital efficient “synthetic managed account” investment returns are directed by an asset manager
  • J.P. Morgan is focused on finding the most efficient ways to get equity protection, or increase equity exposure in the most efficient way
  • Hedges are designed to offer required economic protection with attractive Solvency II treatment

 

Contact the Equity Derivatives Group 
For additional information, please 
email us or call the following numbers:

  • London EDG Desk: +44 207 779 2446
  • New York EDG Desk: +1 212 622 2505
  • Asia ex-Japan EDG Desk: +852 2800 8857
  • Japan EDG Desk: +813 673 68722
 
 

Copyright © 2014 JPMorgan Chase & Co. All rights reserved.