Investment Fundamentals Forum 21 January 2013 Understanding and Trading Equity & Related Products in Singapore Th ng Beng Hooi, CFA 1 Speaker Biography Th ng Beng Hooi, CFA 2
Disclaimer Please note that the information is provided for you by way of information only. All the information, report and analysis were and should be taken as having been prepared for the purpose of general circulation and that none were made with regard to any specific investment objectives, financial situation and particular needs of any particular person who may receive the information, report or analysis (including yourself). Any recommendation or advice that maybe expressed in or inferred from such information, reports or analysis therefore does not take into account and may not be suitable for your investment objectives, financial situation and particular needs. You understand that you buy and/or sell and/or take any position in/or on the market, in any of the stocks, shares, products or instruments etc. based on your own decision(s). This is regardless of whether the information is analysed or not, regardless of the details or information related to price levels, support/resistance levels and any information based on technical or fundamental analysis. You understand and accept that nothing told or provided to you whether directly or indirectly is to be a basis for your decision(s) in relation to the market or your trades or transaction(s). Please see a registered trading representative or financial adviser for formal advise. 3 WHAT S AVAILABLE? 4
5 What Are Specified Investment Products? Some products listed on SGX may have terms and features that are not as well known and widely understood as others. These are referred to as Specified Investment Products. 6
What Are Specified Investment Products? Specified investment products (Listed) include: Certificates Exchange Traded Funds (ETFs) Exchange Traded Notes (ETNs) Extended Settlement Contracts Structured Warrants Callable Bull / Bear Contracts (CBBCs) Not yet launched 7 What Are Specified Investment Products? Specified investment products (Unlisted) include: CFDs Leveraged FX Equity Linked Notes Other Structured Products 8
What Are Specified Investment Products? Specified investment products (Unlisted) include: CFDs Leveraged FX Equity Linked Notes Other Structured Products 9 What Are Excluded Investment Products? Shares Fully paid depository receipts representing shares Subscription rights pursuant to rights issues Company issued warrants/derivatives Units in business trusts Units in real estate investment trusts Debentures (other than asset backed securities & structured notes All above must be listed 10
AMERICAN DEPOSITORY RECEIPTS 11 Risks Market & Company Specific Risk Foreign Currency Risk Foreign Political, Social and Economic Risk Price Risk (tracking error) 12
INTRODUCTION TO EXCHANGE TRADED FUNDS 13 What Are Exchange Traded Funds? An investment vehicle traded on the Singapore Exchange (SGX) like any other security (e.g. stocks). The ETF invests in a basket of securities in order to track a stated index. For example: the STI ETF tracks the STI index. 14
What Are Exchange Traded Funds? ETFs exist for many asset types: stocks, bonds, commodities and currencies. ETFs that track certain stock sectors or geographical markets are also available. For example: the ishares Dow Jones US Technology Sector Index Fund tracks the tech sector of the DJIA. 15 What Are Exchange Traded Funds? An ETF is like a unit trust fund with the following features: Invests in assets of your choice. Listed on SGX. Traded like any other stock. Brokerage fees similar to any other stock. Low annual management fees. 16
Direct Replication (Cash Based) Full Replication ETF holds same constituent stocks in the same weightage as the stated index. Higher tracking error due to expenses and tax withholdings on dividend payments. No counter party risk. Representative Sample ETF holds only selected constituent stocks that have high correlation with stated index. Higher tracking error due to expenses and tax withholdings on dividend payments. No counter party risk. 17 Synthetic Replication Swap Based Use swaps to gain performance similar to the stated index. Swaps used may not even be the same constituent stocks. Lower tracking error as swaps give more precise tracking to the stated index. Counter party risk arising from swap agreement. Derivative Embedded Use derivatives to replicate the stated index. Derivatives used are warrants and participatory notes. Higher tracking error due to higher cost of derivatives. Counter party risk arising from possibility of default. 18
Low Cost Benefits of Trading ETFs Most ETFs track a stated index. No active management means low management fees. No sales charge (unlike unit trust funds). Trading Flexibility ETFs can be traded any time during market hours. All current order types can be used e.g. market order, limit order, stop loss order etc. Diversification Extremely efficient and economical to diversify using ETFs. Requires only a relatively small cash outlay to gain market exposure. Transparency No investment style drift. So WYSWYG What You See is What You Get. Minimum cash drag. Because ETFs are almost fully invested, little cash is held for redemption purposes (unlike unit trust funds). 19 Comparison of ETFs, Unit Trust Funds and Stocks ETF Unit Trust Fund Stock Diversification Excellent Excellent None Continuous Pricing Intraday End of Day Intraday Sales Charge 0% 3% 5% 0% Fee Structure Brokerage 0.1% 0.4% 0% 0.1% 0.4% Management Fees Less than 1% 1% 2% 0% Settlement Date T +3 Upfront T + 3 Can Contra? Yes (SGX only) No Yes (SGX only) Dividend Payout Yes Yes Yes 20
Market and Sector Risk Risks in Trading ETFs ETF is exposed to broad market and sector movements. Sudden adverse movement in the wider market and sector will impact the value of the ETF. Tracking Error ETF is unable to exactly track the performance of the stated index. This could be because of transaction costs, withholding taxes on dividends etc. Counter Party Risk Run the risk of default or the counter party failing to honour its obligations. Applies more to synthetically created ETFs. Foreign Exchange Risk ETFs denominated in foreign currency are exposed to adverse currency movements against the investor. FX risk needs to be considered or managed. 21 Strategic Allocation Examples on Trading ETFs Long term, buy and hold strategy. Gain exposure to broad market movements for low brokerage and management fees. Tactical Trading Short term trading for the purposes of speculative profits. Relatively less risky than investing in specific stocks because of diversification. Core + Satellite Investing Core piece composed of broad market ETFs. Satellite created by picking riskier stocks in hopes of higher returns. Overall portfolio return = core return + satellite return. Hedging ETFs are ideal for hedging due to low cost and relatively less risk exposure compared to derivative products. 22
INTRODUCTION TO STRUCTURED WARRANTS 23 What Are Structured Warrants? An investment vehicle issued by financial institutions (issuers) which enable investors to: Participate in the performance of the underlying stock. At a fraction of its price. Investor s capital is freed up for other investing or trading purposes. 24
Types of Structured Warrants A call warrant gives the holder the right but not the obligation to buy the underlying asset at the exercise price. Increases in value if the price of the underlying goes up. A put warrant gives the holder the right but not the obligation to sell the underlying asset at the exercise price. Increases in value if the price of the underlying drops. 25 Structured Warrant Features Exercise price The predetermined price which is fixed before the warrant is listed. Exercise style Structured warrants listed on SGX ST are primarily European style. Meaning the warrants can only be exercised on expiry date. 26
Structured Warrant Features Expiry date Warrants have a finite lifespan and cease to exist once its expired. Conversion ratio Also known as the entitlement ratio. The number of warrants needed to exercise into 1 unit of the underlying asset. Example: conversion ratio of 3 means 3 warrants are needed to convert into 1 unit of the underlying asset. 27 Concept of Moneyness Scenario Call Warrant Put Warrant Underlying Asset Price Greater Than Exercise Price In The Money Out Of The Money Underlying Asset Price Exactly the Same As Exercise Price At The Money At The Money Underlying Asset Price Less Than Exercise Price Out Of The Money In The Money 28
Determining the Price of a Warrant The price of a warrant has two components: Intrinsic value Time value Warrant Price = Intrinsic Value + Time Value 29 Determining the Price of a Warrant What is Intrinsic Value? Difference between the price of the underlying asset and the warrant s exercise price when the warrant is in the money. 30
Determining the Price of a Warrant What is Time Value? The warrant has value only when it has not reached its expiry date. At expiry date, the warrant expires and is worthless. Time Value Rate of Time Decay Maturity 31 For example, Price of a Call Warrant Current price of underlying asset is $4.80 Call warrant s exercise price is $4.50 Time value of warrant is $0.40 Intrinsic value is $0.30 ($4.80 $4.50) Warrant price is then $0.70 ($0.40 + $0.30) 32
For example, Price of a Put Warrant Current price of underlying asset is $3.00 Put warrant s exercise price is $3.20 Time value of warrant is $0.20 Intrinsic value is $0.20 ($3.20 $3.00) Warrant price is then $0.40 ($0.20 + $0.20) 33 Structured Warrant Names Warrant name: HSI18400MBECW111129 Item Term Explanation Underlying asset HSI Hang Seng Index Exercise price 18400 Warrant is exercisable when the HSI reaches 18,400 points. Issuer MB Macquarie Bank Type ECW European style Call warrant. Expiry date 111129 In YYMMDD format. The expiry date for this warrant is Nov 29 th 2011. 34
Benefits of Trading Structured Warrants Leverage Gain exposure to an underlying asset at only a fraction of its price. Investors have complete flexibility in deciding how much leverage or gearing they need. The greater the amount of leverage, the greater the percentage change in the warrant price when the price of the underlying changes. Cash Extraction For the same amount of exposure, investors only need to pay for a fraction of underlying s price. Investor s capital is freed up for other investing or trading purposes. Limited Downside Losses Limited only to the amount paid for the warrants. Potential losses from investing in the underlying asset can be much higher. However, potential gains from call warrants are unlimited. 35 Benefits of Trading Structured Warrants Portfolio Protection Put warrants can be used as a hedge. Especially useful for investors with long term long positions or portfolios. Diverse Market Access Good selection of warrants for local and foreign stocks and indices. No Margin Calls There are no margin calls. Cash top up is unnecessary unlike Contract for Differences (CFDs) or Options. Index Warrants No special stock picking skills needed. Take a macro view of overall market instead. Only exposed to market risk and not stock specific risk. Useful for hedging purposes. 36
Risks in Trading Structured Warrants Limited Lifespan Structured warrants have limited lifespans. Potential gains are only realized if the warrants are in the money on the expiry date. Investors will lose the what they had paid for the warrants if they expire at the money or out of the money. Leverage Both potential gains and losses are magnified by the use of leverage. However losses are only limited to what the investor had paid for the warrants. Issuer Risk Warrants are issued by financial institutions as unsecured financial instruments. Warrant holders do not have additional protection and will be treated as any other creditor in the event that the financial institution is unable to fulfill its obligations. 37 Risks in Trading Structured Warrants Currency Risk Investors bear the FX risk for warrants denominated in foreign currencies. Some issuers may offer warrants localized into SGD on a notional 1 for 1 basis. This shields investors from FX risk. Market Risk Similar to all other types of securities, warrants are exposed to market risk. Movements in broader market may impact the price of the underlying asset and hence the value of the warrants. Market risk also includes market forces such as the demand and supply of warrants. Suspension from Trading If the underlying asset is suspended or halted from trading, SGX may impose a similar suspension or halt in the trading of its warrants. Warrant holders may not be able to exit their positions at a time of their choosing or may have to exit at a loss. 38
Examples of Trading Structured Warrants Cash Extraction and Freeing Up Capital Market conditions are volatile and investor wants to hold larger cash reserves: To take advantage of opportunities for cheap bargains when they appear. As a buffer against volatility. However investor wants to maintain exposure to stock price movements. Sell the stock holdings and use some of the cash to buy warrants. 39 Examples of Trading Structured Warrants Portfolio Hedging Investor intends to hold his stock portfolio for the long term. Very common to use CPF to buy good Singapore stocks that pay decent dividends and hold them to forever. However market volatility and downside risk is increasing. Buy put warrants to hedge against down side risk. 40
INTRODUCTION TO FUTURES 41 What Is A Futures Contract? A futures contract is an agreement to buy or sell an asset at a specified price to be delivered at some specified future time. Broad categories of futures contracts: Commodity futures Example: Metals, agriculture and energy related. Financial futures Example: Stock indices and interest rates. 42
What Is A Futures Contract? Features of a futures contract Standardized contract with standardized quality and quantity. Both buyers and sellers of futures are obligated to fulfill the contract on settlement or delivery date. Commodity futures are physically settled. Financial futures are cash settled. 43 What Is A Futures Contract? Features of a futures contract Traded on SGX DT as a derivative product. Traded on margin (i.e. leveraged). Futures can be traded any time during market hours up to the settlement date. Short selling is permitted. Value of futures is marked to market daily and impacts the investor s margin balance. 44
Benefits of Trading Futures Contracts Hedging with Commodity Futures Users of the actual commodity can hedge against adverse supply situations. For example A maker of shoes needs to secure a steady supply of rubber for next year. Buying a SICOM rubber futures contract ensures rubber delivery is not disrupted regardless of market conditions in the next year. Hedging with Financial Futures Investors can take a futures position that is opposite from what they are holding. In a perfect hedge, gains on one position will be net off by losses on the other position regardless of how the market moves. Example: Sell STI index futures contracts as a hedge to a portfolio of STI component stocks. Speculative Trading Buy and sell futures contracts for capital gains. Investor buys futures if he believes prices of the underlying asset will rise. Investor sells futures if he believes prices of the underlying asset will fall. 45 Risks in Trading Futures Contracts Hedging Imperfections Price movements in the underlying asset of a futures contract may not move closely to the value of shares being hedged. The value of the shares being hedged may not exactly equal the value of the futures contracts. The hedge may then over or undershoot. Liquidity Risk Liquidity can dry up in a rapidly rising or falling market. For example, a futures contract has risen or fallen by the maximum allowable daily limit. No counter party is available for investors to offset their positions. Leveraged Losses Futures are traded using margins. Both losses and gains are magnified through the leverage effect. 46
Examples of Trading Futures Contracts Hedging a Stock Portfolio An investor is holding a long term portfolio of STI component stocks. The portfolio s value is about $550,000 and the current STI index level is 2,760. The investor shorts 20 contracts of the STI index futures as a hedge. The market corrects and on settlements date, the STI index level is 2,600. 47 Examples of Trading Futures Contracts Hedging a Stock Portfolio Investor s stock portfolio has lost about $31,884 (160 / 2760 x $550,000). However, her futures position has gained $32,000 (160 x 20 x $10). Investor s net position is $116. 48
INTRODUCTION TO OPTIONS 49 What Is An Option? An investment vehicle developed by SGX which enable investors to: Participate in the performance of the underlying asset. At a fraction of its price. Options are similar to structured warrants but with some key differences. 50
Types of Options A call option gives the option buyer the right but not the obligation to buy the underlying asset at the exercise price. Increases in value if the price of the underlying goes up. A put option gives the option buyer the right but not the obligation to sell the underlying asset at the exercise price. Increases in value if the price of the underlying drops. 51 Exercise price Option Features The predetermined price which is fixed before the option is listed. Exercise style Options traded on SGX DT are European style. Meaning the options can only be exercised on expiry date. 52
Expiry date Options Features Options have a finite lifespan and cease to exist once its expired. Investors can buy, sell and write options Buy: investor buys an option from SGX. Sell: investor sells an option which she already owns. Write: investor sells an option which she does not already own (similar to short sales). 53 Concept of Moneyness Scenario Call Option Put Option Underlying Asset Price Greater Than Exercise Price In The Money Out Of The Money Underlying Asset Price Exactly the Same As Exercise Price At The Money At The Money Underlying Asset Price Less Than Exercise Price Out Of The Money In The Money 54
Determining the Price of an Option The price of an option has two components: Intrinsic value Time value Option Price = Intrinsic Value + Time Value 55 Determining the Price of an Option What is Intrinsic Value? Difference between the price of the underlying asset and the option s exercise price when the option is in the money. 56
Determining the Price of an Option What is Time Value? The option has value only when it has not reached its expiry date. At expiry date, the option expires and is worthless. Time Value Rate of Time Decay Maturity 57 For example, Price of a Call Option Current price of underlying asset is $12.00 Call option s exercise price is $11.20 Time value of option is $0.70 Intrinsic value is $0.80 ($12.00 $11.20) Option price is then $1.50 ($0.70 + $0.80) 58
For example, Price of a Put Option Current price of underlying asset is $6.30 Put option s exercise price is $8.00 Time value of option is $0.30 Intrinsic value is $1.70 ($8.00 $6.30) Option price is then $2.00 ($0.30 + $1.70) 59 Leverage Benefits of Trading Options Gain exposure to an underlying asset at only a fraction of its price. Investors have complete flexibility in deciding how much leverage or gearing they need. The greater the amount of leverage, the greater the percentage change in the Option price when the price of the underlying changes. Cash Extraction For the same amount of exposure, investors only need to pay for a fraction of underlying s price. Investor s capital is freed up for other investing or trading purposes. Limited Downside Losses (Does not apply to option writers) Limited only to the amount paid for the options. Potential losses from investing in the underlying asset can be much higher. However, option writers face unlimited liabilities and much higher potential losses. 60
Limited Lifespan Risks in Trading Options Options have limited lifespans. Potential gains are only realized if the options are in the money on the expiry date. Investors will lose the what they had paid for the options if they expire at the money or out of the money. Leverage Both potential gains and losses are magnified by the use of leverage. Option Writer s Risk Option writers face unlimited contingent liabilities. Contingent liabilities are realized at the expiry date if the option writers are out of the money. Potential losses can be significant. 61 Risks in Trading Options Currency Risk For options denominated in foreign currencies, exchange rate fluctuations may have adverse effects on the value, price or return of options. Market Risk Similar to all other types of securities, options are exposed to market risk. Movements in broader market may impact the price of the underlying asset and hence the value of the options. Market risk also includes market forces such as the demand and supply of options. Suspension from Trading If the underlying asset is suspended or halted from trading, SGX may impose a similar suspension or halt in the trading of its options. Option holders may not be able to exit their positions at a time of their choosing or may have to exit at a loss. 62
Structured Warrants vs. Options. Structured Warrants Options Issuer Financial institution SGX Trading Market Securities market Derivatives market Trading Mechanism Buy and sell only Buy, sell and write (short sell) Product Features Settlement Maximum Liability Wide range of exercise prices and expiry dates Cash settled Amount paid for warrants Standardized and limited exercise prices and expiry dates Cash (index options) and physically (stock options) settled. Potentially unlimited losses for writers Margin Requirements None Only for writers 63 Examples of Trading Options Portfolio Hedging Investor intends to hold his stock portfolio for the long term. Very common to use CPF to buy good Singapore stocks that pay decent dividends and hold them to forever. However market volatility and downside risk is increasing. Buy put options to hedge against down side risk. 64
Examples of Trading Options Speculative Trading Selected basic option strategies Rising Volatility Falling Volatility Bullish Long call option Short put option Bearish Long put option Short call option Undecided Long straddle Short straddle 65 INTRODUCTION TO CERTIFICATES Discount Cert Long Note + short Put 66
What Is A Certificate? A certificate is an investment product issued by a third party financial institution, offering investment opportunities based on different market themes and expectations. Requires minimal capital as compared to investing directly in the underlying assets. Price movement of certificates is transparent to investors. 67 Discount Certificates Allows an investor to buy into the performance of an underlying asset at a discount to its actual price. The potential gain to the investor is limited to a maximum amount called the cap strike. The cap strike is predetermined at the time of issue and remains constant till the expiry date. Discount certificates are also known as call spread warrants. 68
How Do Discount Certificates Work? Shares of OCBC Bank are trading at $8.00. A 6 month discount certificate on OCBC with a cap strike of $7.50 costs $7.00. So investors may get the share at $7.00 which represents a discount of 12.5%. At the expiry date, there are 3 possible scenarios. 69 How Do Discount Certificates Work? Scenario 1 Price of OCBC share is above cap strike. Regardless of actual share price, discount certificate is settled in cash. Investor is paid $7.50 (the cap strike). Return is 7.14% ($7.50/$7.00 1) 70
How Do Discount Certificates Work? Scenario 2 Price of OCBC share is $7.40. This price is below cap strike but above the price paid for the discount certificate. Investor gets one share of OCBC. And realizes an immediate gain of $0.40 ($7.40 $7.00). Return is 5.71% ($7.40/$7.00 1) 71 How Do Discount Certificates Work? Scenario 3 Price of OCBC share is $6.80. This price is below both the cap strike and the price paid for the discount certificate. Investor gets one share of OCBC. And makes a loss of $0.20 ($7.00 $6.80). Loss is 2.86% ($6.80/$7.00 1). However the loss is smaller than if the investor had bought the share directly. 72
Participation Certificates Essentially zero strike warrants. Tracks the performance of the underlying asset with no leverage. Enables investors to overcome foreign market trading restrictions and settlement processes. All trades are settled through SGX. 73 Participation Certificates No time decay and no premium payments. Investor s gain or loss roughly equivalent to Gain or loss on the underlying asset and Gain or loss on the FX rate 74
How Do Participation Certificates Work? Value of participation certificate at any time Value = Underlying index value x Forex rate Exercise amount Exercise amount is a predetermined number set by the issuer. Remains fixed until certificate matures. 75 Daily Lock In Certificates Daily Lock In Certificates is a structured product with a daily accrual feature. Investor accumulates a lock in amount if the underlying shares or indices perform within a stipulated range. No accumulation of any return otherwise. 76
How Do Daily Lock In Certificates Work? Knock Out Level Issuer sets a pre determined level for certificates to knock out. Essentially means that the issuer has the right to call the certificate. If this occurs, investor will get initial investment back plus any accrued lock in amount. 77 How Do Daily Lock In Certificates Work? Knock In Strike Level Is a pre determined level set by the issuer. On valuation date (i.e. maturity), If the price of the underlying asset is above the knock in strike level, investor gets initial investment back plus any accrued lock in amount. Otherwise, investor loses some of initial investment but still receives any accrued lock in amount. Investor loses all of initial investment if price of underlying falls to zero. 78
Double Chance Certificates Double Chance Certificates is a short term investment product. Its payout is dependent on the performance of the underlying asset at expiry. Same amount of risk compared to directly investing in the underlying stocks. May offer investors the chance of doubling their investment returns, if held to expiry. 79 How Do Double Chance Certificates Work? Determination Price Issuer sets a pre determined level as the Determination Price. At expiry, Investor makes a return if price of underlying is above the Determination Price. Otherwise, investor will receive one share of the underlying instead. 80
How Do Double Chance Certificates Work? Cap Strike At expiry, If price of underlying is above Determination Price but below the Cap Strike, investor s return is: Gain = 2 x (Price of underlying Purchase Price) 81 How Do Double Chance Certificates Work? Cap Strike At expiry, If price of underlying is above Determination Price and above the Cap Strike, investor s return is: Gain = 2 x (Cap Strike Purchase Price) 82
Benefits of Trading Certificates Diversification Access to foreign markets and instruments without restrictions of foreign jurisdiction or potential high cost of trading. Yield Enhancing Able to increase potential returns in a flat or sideways moving market. Liquidity and Low Minimum Investment Market maker is obligated to provide liquidity at competitive bid and ask prices. Investors can trade at any time during market hours. Only 1 lot (1,000 units) as minimum investment. Low and Transparent Costs Cost of trading is only the brokerage fee plus a bid ask spread. No sales charge or management fee (unlike a unit trust fund). However, dividends on stocks is absorbed by issuers (only for participation certificates). 83 Credit Risk Risks in Trading Certificates Certificates are issued by third party financial institutions. There is a risk that these institutions are unable to fulfill their obligations to settle the transactions. Liquidity Risk Rapidly rising or falling markets may lead to a possibility of certificates holders being unable to sell his certificates at a reasonable price. Market Risk Similar to all other types of securities, certificates are exposed to market risk. Movements in the broader market may impact the price of the underlying asset and hence the value of the certificates. Exchange Rate Risk For certificates denominated in foreign currencies, exchange rate fluctuations may have adverse effects on the value, price or return of certificates. 84
INTRODUCTION TO EXCHANGE TRADED NOTES 85 What Is An ETN? An ETN is an investment product issued by a third party financial institution, over a wide range of assets. Combines both the benefits and risks common to investments in bonds and exchange traded funds (ETFs). Returns of ETNs track the performance of an underlying asset and is also dependent on the credit rating of the issuer. 86
Ease of Access Benefits of Trading ETNs Grants convenient access to asset classes, markets and sectors that investors ordinarily may find difficult to access. Overcomes foreign market trading restrictions, investment limits and capital controls. Intraday Exchange Liquidity Traded like stocks. Market makers provide real time bid and ask prices during market hours. All traditional trading techniques can be employed for ETNs. Transparent Performance Tracking Tracks performance of market benchmarks, commodity prices, currency pairs. Indicative value of ETN is calculated on a daily basis and made available via issuer s websites. 87 Credit Risk Risks in Trading ETNs ETNs are not backed by a pool of assets held in trusts (unlike ETFs). Solely reliant on the issuer s ability to make payments. There is a risk that these institutions are unable to fulfill their obligations to settle the transactions. Credit rating of the issuer is important to gauge financial strength of the issuer. Liquidity Risk Rapidly rising or falling markets may lead to a possibility of ETN holders being unable to sell his ETNs at a reasonable price. Redemptions can only be made in large blocks (typically 50,000 units). Market Risk Similar to all other types of securities, ETNs are exposed to market risk. Movements in the broader market may impact the price of the underlying asset and hence the value of the ETNs. Exchange Rate Risk For ETNs denominated in foreign currencies, exchange rate fluctuations may have adverse effects on the value, price or return of ETNs. 88
End of the Session Questions? 89