This book has two themes: Private Banking and investment decisions regarding Structural Financial Products. Dr. Dimitris Chorafas examines in a rigorous way whether structured financial products are advisable investments for retail and institutional investors and, if yes, which risks they entail. As our society becomes increasingly affluent, and state-supported pension schemes find it difficult to survive, a growing number of high net-worth individuals, and families, have become retail investors – looking for ways and means to optimize wealth management, and Private Banking deals with these sorts of clients. Private banking also deals with clients that are institutional investors, such as pension funds, mutual funds, and insurance companies, as well as not-for-profits, foundations and companies explicitly set up for wealth management. Both institutional and retail investors are being offered by the banks they work with structured products. Typically, these are securities that provide them with a redemption amount, with may be either with full or partial capital protection, and some type of return. The book examines structured financial products, their polyvalent nature, and the results which could be expected from them. Return on structural instruments, which are essentially derivatives, is paid in function of a specific investment strategy on selected underlying asset(s). This essentially means on the performance of the underlyings, obtained by asset managers, which may be banks or hedge funds, through purchase or sale of embedded options. But there are risks. Both risk and return from structured products are related to three main issues: the volatility of future value of an underlying, the uncertainty of future events, and the exposure of the product. Every type of investment is subject to market forces, and the more leveraged a portfolio is, the greater will probably be both the assumed risk and the expected reward. The fact that struct

Key Features

*Because it is based on intensive research, the book is rich in practical examples and case studies *Addresses the growing trend towards the use of structured financial instruments in private banking *Thorough treatment of structured financial products that keeps maths to a minimum


At the institutional side are the practitioners and professionals, from treasurers to operational executives, risk management officers and their staff, as well as auditors and financial analysts; investment consultancies; accountancies; auditing firms, independent rating agencies, and central bankers.

Table of Contents

PART ONE: PRIVATE BANKING Chapter 1: PRIVATE BANKING DEFINED 1. Introduction 2. Private Banking Clients 3. Organizational Challenges, Security and Secrecy 4. A Private Banking Roadmap 5. The Recycling of Household Debt Through Private Banking 6. Synergy of Private Banking and Institutional Investors 7. A System Approach to Wealth Management Chapter 2: KNOW YOUR CUSTOMER AND HIS/HER PROFILE 1. Introduction 2. The Sense of Professional Investment Services 3. Wealth Management in Accordance to the Client's Profile 4. Knowledge Engineering Is Assisting the Investor 5. A Financial Advisory System for Currency Exchange 6. Caveat Emptor and Accountability in Private Banking Chapter 3: BUSINESS OPPORTUNITY: FEES AND COMMISSIONS FROM PRIVATE BANKING 1. Introduction 2. Trades, Investments, and Private Banking Customers 3. Establishing a Strategy of Fees and Commissions 4. Different Types of Companies Have Different Strategic Aims 5. Performance and Remuneration of Investment Managers 6. Simulation of Portfolio Performance 7. The Impact of Business Risk Chapter 4: RISK AND RETURN WITH INVESTMENTS 1. Introduction 2. Basic Notions of Risk Assessment 3. Prerequisites for Rigorous Risk Control 4. Fine-Tuning the Philosophy of Investments 5. Risk and Return with Implied Volatility 6. Risk-Adjusted Pricing. An Example with Credit Risk 7. An Introduction to Stress Testing PART TWO: ASSET MANAGEMENT Chapter 5: ASSET MANAGEMENT DEFINED 1. Introduction


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© 2005
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About the author

Dimitris Chorafas

Since 1961, Dr Dimitris N. Chorafas has advised financial institutions and industrial corporations in strategic planning, risk management, computers and communications systems, and internal controls. A graduate of the University of California, Los Angeles, the University of Paris, and the Technical University of Athens, Dr Chorafas has been a Fulbright scholar. Financial institutions which have sought his assistance include the Union Bank of Switzerland, Bank Vontobel, CEDEL, the Bank of Scotland, Credit Agricole, Österreichische Länderbank (Bank Austria), First Austrian Bank, Commerzbank, Dresdner Bank, Mid-Med Bank, Demir Bank, Banca Nazionale dell'Agricoltura, Istituto Bancario Italiano, Credito Commerciale and Banca Provinciale Lombarda. Among multinational corporations Dr Chorafas has worked as consultant to top management, are: General Electric-Bull, Univac, Honeywell, Digital Equipment Corp, Olivetti, Nestlé, Omega, Italcementi, Italmobiliare, AEG-Telefunken, Olympia, Osram, Antar, Pechiney, the American Management Association and host of other client firms in Europe and the United States. Dr Chorafas has served on the faculty of the Catholic University of America and as visiting professor at Washington State University, George Washington University, University of Vermont, University of Florida, and Georgia Institute of Technology. Also, the University of Alberta, Ecole d'Etudes Industrielles de l'Université de Genève, and Technical University of Karlsruhe. More than 6,000 banking, industrial and government executives have participated in his seminars in the United States, England, Germany, other European countries, Asia and Latin America.

Affiliations and Expertise