The dark side of the moon: structured products from the customer's perspective

Structured financial products have gained more and more popularity in recent years, but nevertheless has their success so far notthoroughly been analyzed. In this article we develop a theoreticalframework for the design of optimal structured products and analyzethe maximal utility gain for an investor that can be achieved by introducing structured products. We demonstrate that most successful structured products are not optimal for a perfectly rational investor and investigate the reasons that make them nevertheless look so attractive for many investors.<BR>