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Banking Industry Solutions

What We Offer

Kumaran Systems offers a solution for handling structured products with basic features. This solution allows creating structures with combinations of derivatives and financial instruments that have significant risk/return and/or cost savings profiles that may not be otherwise achievable in the marketplace. Structured products are designed to provide investors with highly targeted investments tied to their specific risk profiles, return requirements and market expectations.These products are created through by combining underlyinglike shares, bonds, indices orcommodities with derivatives. The value of derivative securities, such as options, forwards and swaps is determined by the prices of the underlying securities.

The market for derivative securities has grown quickly in recent years. The main reason for this lies in the economic function of derivatives; it enables the transfer of risk, for a fee, from those who do not want to bear it to those who are willing to bear risk.

A feature of some structured products is a “principal guarantee” function, which offers protection of principal if held to maturity. For example, an investor (ABC) invests USD 100 under Principal protected Notes. The issuer of the PPN (XYZ) will simply invest a certain amount in a risk free bond that has sufficient interest to grow to 100 after the five-year period. This bond might cost USD 80 today and after five years it will grow to USD 100 so that the issuer XYZ will pay US 100 to the investor ABC. With the leftover funds the issuer purchases the options and swaps needed to perform whatever the investment strategy is.

Structured products were created to meet specific needs that cannot be met from the standardized financial instruments available in the markets. Structured products can be used as an alternative to a direct investment, as part of the asset allocation process to reduce risk exposure of a portfolio, or to utilize the current market trend.