Any investment in securities carries certain risks. In terms of the investment products described here, the following special risks apply in particular (the list should not be considered all-inclusive):

• Variable pricing factors: Changes in the implied volatility of the underlying instrument have an influence on the value of most of these investment products. In addition, their value is influenced by changing interest rates, altered expectations for dividends on the underlying instrument, as well as attrition of the remaining term to maturity. Thus during the term of these products, their value can develop differently than what the investor originally expected. The ultimate repayment profile of structured products is normally achieved only at the end of their term.

• Safety threshold: Many of these investment products feature a safety threshold. If the underlying instrument were to penetrate that level, the repayment profile of the product can change significantly. The probability that the safety threshold will be violated increases considerably when the underlying instrument starts to approach the threshold. For that reason, the value of an investment product can deteriorate markedly even before an actual breach of the safety threshold.

• Leverage: Due to their particular features, a number of these product types can in certain circumstances react disproportionately to movements in the underlying instrument. As a result of this leverage, heavy losses or sizeable gains can be realized within a short period of time. Theoretically, a total loss could be incurred on any investment product that does not carry a capital guarantee.

• No additional income: Most investment products of this nature do not confer rights to receive interest or dividend payments during the given product’s term to maturity.

• Limited term: The lifespan of an investment product is usually limited. The rights you acquire through the purchase of these products can lose value during the term or even lapse entirely upon maturity. The shorter the remaining term to expiration, the greater the risk of a loss in value because there’s not much time left for the speculation to pay off.

• Underlying instruments denominated in foreign currency: If the underlying instrument is traded on its home exchange in a currency other than the Swiss franc, investors bear an additional foreign exchange risk because the value of the product is derived directly from the price of the underlying instrument. Investors bear no currency risk in the case of a currency-protected certificate.

• Issuer default risk: From a legal standpoint, almost all structured products are considered to be unsecured debentures of the given issuer. If the issuer were to have difficulty meeting its payments or become insolvent, the invested capital is not protected. Hence the investor also bears a creditworthiness risk (exception: secured products – see corresponding section).

Before you trade in any of these products, you should gain a solid understanding of how they function as well as have a well-founded opinion on where the market might be headed.