The performance of a derivative depends on the performance of the respective underlying and the structure of the respective product. Depending on the structure, factors such as dividend payments, interest rates, exchange rates, or volatility may affect the value of the derivative.
To calculate the unit price of a derivative, the issuer uses the theoretical fair value based on financial mathematical models. Any difference between the calculated theoretical value and the actual unit price may result, for example, from the issuer's margin, any distribution fees, and the costs of structuring, pricing, settling, and hedging the product. Accordingly, the buying and selling prices (bid and ask prices) set by the issuer during the term are not based directly on supply and demand for the respective product, but rather on the issuer's pricing models.
Leveraged products can participate more strongly in the performance of the underlying instrument through so-called leverage. Due to the influence of factors such as the performance of the underlying, (remaining) term and volatility on the price of the leveraged product, the price is in direct proportion to the underlying, but is usually significantly below it. This means that the buyer of the leveraged product can participate in price changes of the underlying to a greater extent in percentage terms than in the case of a direct investment in the underlying. This effect is also called "leverage".
With regard to the pricing of derivatives and the influence of volatility, maturity and demand, please also obtain additional information from the issuers, e.g. in the FAQs of HSBC or on the websites of HypoVereinsbank onemarkets and Goldman Sachs.
To calculate the unit price of a derivative, the issuer uses the theoretical fair value based on financial mathematical models. Any difference between the calculated theoretical value and the actual unit price may result, for example, from the issuer's margin, any distribution fees, and the costs of structuring, pricing, settling, and hedging the product. Accordingly, the buying and selling prices (bid and ask prices) set by the issuer during the term are not based directly on supply and demand for the respective product, but rather on the issuer's pricing models.
Leveraged products can participate more strongly in the performance of the underlying instrument through so-called leverage. Due to the influence of factors such as the performance of the underlying, (remaining) term and volatility on the price of the leveraged product, the price is in direct proportion to the underlying, but is usually significantly below it. This means that the buyer of the leveraged product can participate in price changes of the underlying to a greater extent in percentage terms than in the case of a direct investment in the underlying. This effect is also called "leverage".
With regard to the pricing of derivatives and the influence of volatility, maturity and demand, please also obtain additional information from the issuers, e.g. in the FAQs of HSBC or on the websites of HypoVereinsbank onemarkets and Goldman Sachs.