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5:00Structured Notes: Manufacturing "Capital Protection"
A bank promises you 100% of your money back plus a slice of the stock market’s upside. There is no magic. They just bought a bond and a call option, kept the difference, and put their own balance sheet on the line.
A "capital-protected" or principal-protected note (PPN) is not a special instrument. It is a packaging trick: the issuer takes your £100, splits it in two, and reassembles the pieces into something that *looks* like a guarantee. Pull it apart and you find an ordinary bond plus an ordinary option.
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