Question

the principal difference between a structured product and an etn is: a investment time horizon b liquidity risk c credit risk d reference index

Answer 1

The main difference between structured products and ETNs is the credit risk, with structured products having credit risk related to the derivatives components and issuers' obligations, while ETNs carry credit risk linked to the issuer's solvency.

Step-by-step explanation:

The principal difference between a structured product and an Exchange-Traded Note (ETN) is c credit risk. A structured product is a pre-packaged investment strategy which includes derivatives components and has its credit risk linked to the issuer’s financial health. In contrast, ETNs are unsecured debt securities that have the credit risk associated with the solvency of the issuer, similar to bonds. ETNs track an underlying index and pay a return based on the performance of that index, minus fees. Should the issuer face financial difficulties, ETN investors may lose some or all of their investment. In contrast, the credit risk in structured products arises from their built-in derivatives and the issuer's ability to meet contractual obligations.

Answer 2

The principal difference between a structured product and an ETN is credit risk because an ETN is an unsecured debt security that carries the risk of the issuer's default, while structured products can have various protective elements.

Step-by-step explanation:

The principal difference between a structured product and an Exchange-Traded Note (ETN) is option c credit risk. Structured products are complex financial instruments that are typically designed to protect the principal investment while offering the opportunity for returns based on the performance of an underlying asset or index. They may include elements such as derivatives and can be tailored to investors' specific needs or risk preferences. An ETN, on the other hand, is a type of unsecured debt security that is issued by an institution, which promises to pay a return based on the performance of a reference index. The main risk associated with ETNs is the credit risk of the issuer, meaning if the issuer were to default, investors might not receive their expected payments.