These are uncertain times at best for structured products. Even so, at a Private Investment Portfolio Seminar held this week in Geneva Mr Alejandro Pou Cuturi, co-head of Sales for EFG Financial Products was remarkably positive on the future of structured products as traded products become more common than over the counter deals and as transparency increases.

WealthBriefing asked Mr Cuturi the question we raised on the site last week – what will the effect of September’s markets be on the size of the market given Lehman’s default and the fact that market volatility will have caused a large number of product calls in the yield enhancement sector?

Mr Cuturi acknowledged the increased uncertainty and the increase in spreads on many structured products but he does not feel that the events of the last month will have a material effect on the size of the market. He also said that, whilst there may be a temporary drop in interest in yield enhancement products, demand will return as it did after the calls on such products in 2001/2. He is more concerned about the credit risk of the underlying providers – and whether credit ratings are meaningful given current events - and he sees a future where the credit risk may well be linked to sovereign debt rather than bank paper.

In general, spreads are continuing to rise as banks become more risk averse and the long term options that underpin the returns on structured products become even more difficult to price. The credit risk is actually the easy bit!

In the end, all option-pricing models have at their core probability distributions for the price, volatility and a host of Greek letters that only people who live in that world understand. By definition, these distributions remove the outlying observations of the “long tail”. Right now we are in long tail territory.

One participant talked to your correspondent about trying to get someone to write a put on the HFRX hedge fund index recently. Ticking off the names that one would consider approaching to price such a deal the response received was consistent. No-one will do it.

Separately, the Swiss Structured Products Association has elected Zürcher Kantonalbank’s Paolo Vanini to the position of committee vice-president. The assocation also agreed to allow for “passive” members such as buy-side sellers of structured products in Switzerland, auditing firms and other individuals and legal entities that support the purposes of the SSPA. “We are opening association membership to non-issuers to broaden our support base in our efforts to promote and explain the nature of structured products,” said SSPA chief executive Eric Wasescha.