7/28/2019 HSBC Leveraged Basket Notes

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pothtcl zro copo bod from HSBC.o t psd:Lo o two ts of bskt cll op-

tos t 100Short o two ts of bskt cll op-

tos t 129.63 to smlt th cp.o t dwsd:

Short o o tof bskt kock- pt opto t strk of 100 dbrrr of 75.

istors thsot r t rsk fromoltlt of th bs-kt, th strctrof oltlt skw,th shp of th

forwrd cr o th eTFs, th ssrscrdt d corrlto btw bsktcompots.

Brs of ths HSBC ot r lo

corrlto. How ths msr ffcts

prformc s k to l bsktstrctrd ots. Lls r from -1(compltl tl corrltd) to 0(ot corrltd) to 1 (compltl pos-tl corrltd).

Hhl postl corrltd compo-ts rll d sll off so. Ths

lds to mor oltlt d hhr bs-kt opto prcs.at th tm of ssc, SPy ws .881

corrltd wth eFa d .86 wth eeM,whl eFa d eeM hd cross corrlto of .906. Ths ssts tht q-ts th u.S., erop d mrmrkts mo lmost lockstp.

as for th rsk of ssr dflt, thot s scrd dbt. Th z-sprd( msr of crdt rsk) for thr-r dbt for hSBC uSA ic. ws 313bss pots o th prc dt (thtcomprs wth othr ssrs rfrom 85 bss pots for ryal Bak f

Caada to 515 for Bak f AmcaCp.). Hhr z-sprds mpl hhrrsk of ssr dflt d lowr th mr-kt l of th ot.

O th mttr of lqdt, strctrdprodcts r tdd to b hld tlmtrt, so th scodr mrkt ssmll. Ths ot hst trdd sc ssc, ccord to Bloombr dt.Chandra Khandrika (ckhandrika@bloomberg.net

values structured notes for Bloomberg clients

Trr Rtr Optmzto Scr-ts r crtd for stors who h bllsh w o th drl. Thots tpcll offr lr o rtrs,p to cp. Th frst sch rstrdscrts th u.S. m h bsold o J. 26, 2011, b uBS AG dDtsc Bak AG, ccord to srch of ol rcords of th u.S. S-crts d exch Commsso.

O Spt. 27, 2011, hSBC hldgsPlc, throh ts u.S. t, prcd $7.69mllo of ots lkd to th whtdprformc of bskt of loblxch-trdd fds. Th bskt

(d whts) wr: th SPDR S&P500 eTF Trst, tckr SPy (30 prct),th Shrs MSCi eaFe idx Fd, oreFa (30 prct) d th Shrs MSCiemr Mrkts idx Fd, or eeM(40 prct).

Th ots p twc th s of thbskt, to lmt, wth 25 prct bf-fr o th dowsd. a 10 prct th bskt prodcs 20 prct r-tr, whl 50 prct pl brch-s th trr ll for 50 prct loss.

adts cld psd prfor-mc s hh s

59.26 prct low trst-rtromt ddrsfcto b-fts from xposrto bskt of eTFsstd comp-s from Sp dSpor to Brzl.Dsdtscld th prcplb fll t rsk.

Th strctr s rss strtto mplf bllsh w o th mrkt.Th ot poff c b rplctd s

erop-stl bskt optos d h-

HSbc Lvrd bskt Nts Ptntll yld s Mh s 59%

DecoNSTRucTiNg THe DeaL anaLySiS By CHanDRa KHanDRiKa, DeRivaTiveS PRiCing SPeCiaLiST

-60

-40

-20

0

20

40

60

80

100

50 70 90 110 130 150 170

Return(%) Underlying

Note

Identical returns

Source: HSBC prospectus

HSBC Basket Note Offers Twice Leverage With a Cap

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The noTeBloombr iD: RC8190378asst clss: eqtPrcpl protctd: noissr: HSBC uSa ic.udrl: Thr eTFs (SPy, eFa, eeM)Mtrt: 3 rsupsd prtcpto: 200% (59.26% cp)Dowsd prtcpto: 100% (25% brrr)Trd dt: Spt. 27, 2011

Val f t ntsDaTe 9/27/11 8/31/12 9/28/12 10/31/12

Embedded Derivative Value -0.07 $1.43 $1.86 $1.89

Model Price $9.93 $11.43 $11.86 $11.89

Model Price (Credit Adjusted) $8.92 $11.01 $11.49 $11.60

External Price Source (Incapital) $10.89 $11.31 $11.32

12.06.12 www.bloombergbriefs.com Bloomberg Brief | Structured Notes 4

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