The structure of Credit-linked product is composed of bonds position and its related credit derivatives. Credit derivatives include credit default swaps, total return swaps, and credit spread options:

Credit-linked product = bonds + credit derivatives

Credit-linked note is a contract that transfers or avoids credit risk. The issuer pays additional premium to the investor of the note to transfer credit risk. When the credit rating of the relevant asset changes, the investor will be responsible for the losses related to the change of credit, when a credit default event occurs, investors may have to bear some or all of the principal losses.

Common Assets
Related Products
Credit performance of a company, bond or lots of bond.
Credit-linked note


Investors need to pay attention to the structure of the product and the risk of changing in the credit rating of related assets and also credit default events.

Main Risks

There are many types and forms of structured products. Investors should beware the following investment risks, including but not limited to:

  • Credit risk: The credit risk of the issuer or guarantor of a structured product. When the issuer or guarantor goes bankrupt or fails, even if it is a principal-protected product, the investment principal will still cause losses;
  • Liquidity risk: Structured products generally do not provide a secondary market. Due to the lack of a secondary market, investors cannot sell contracts before maturity. Therefore, investors can only enter into liquidation / unwinding transactions with the issuer, the price is determined by the issuer, and the transparency is low.

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