Investment Certificates

Investment certificates are securities traded both on the stock exchange and over the counter whose price is based on the development of the underlying asset. This asset may be stock exchange indices, shares, commodities, interest, currencies, etc. Unlike other securities, such as shares, funds, interest rates or currencies, their prices are not based on supply and demand for the particular investment certificate, but exactly on the development of the underlying asset for which the certificate was issued. Here, there are rules that exactly define the value to be received by the certificate holder in the case of a movement of the underlying asset at the given moment of time. In all certificates (derivatives) it is necessary to take into account the risks of investment instruments of derivative type, the risks arising from the underlying asset and the credit risk / (certificate) issuer risk – in case of the issuer’s bankruptcy, there may be a loss of all funds invested regardless of the current developments on the market. Currency Risk – Some certificates may be issued in another currency than that required by the investor. Terminology Risk – Although these securities have been traded for many years, it still might not be unambiguously clear from the name of the certificate which type of certificate is concerned. Liquidity Risk (see also SPREAD) – the owner of the certificate can sell it anytime and need not wait for its maturity, but the price may be extremely disadvantageous at the given moment.