Structured products are in their most simple terms, a package of a number of other available investment products. This package can consist of varying different investment products, in different combinations, but typically will always include options. Since they can be structured using a very wide range of different investment products, this allows the product to be able to be tailored to a client's specific needs. Potentially their risk or return objectives to give them exactly the payoffs that they are looking for. Structured products are also often used within the wealth management space as a way of managing a client's tax exposure. One of the most simple structured products is referred to as a principal protected note. This is a product offered to a client, which will guarantee for them the return of the money that has been invested. However, should some specified stock or equity markets increase above their current levels, the principal protected note promises to pay the client additional return as that equity market increases. So they get their money back for sure, and they also get to participate in good performance of equity markets. If equity markets fall, the client doesn't lose out and they get their money back for sure. This sounds almost too good to be true from the investor's perspective. So why is a bank willing to offer this product to a client? How can they manage the risk internally around that product? Well, the way that the bank might do that is by taking the client's invested amounts and using some of it to buy a product which will mature to the principal, which is the initial amount invested by the client, at the maturity date of this principal protected note. So buying some sort of risk-free government zero coupon bond. Zero coupon bonds are always priced at a discount to their par value. So the amount of money that will be required to invest in this risk-free zero coupon bond will be less than the amount of money that the client has invested into the product, and the bank can, with the remaining amount of money, invest in at-the-money call options. This will provide to the bank a positive payoff if equity markets increase above current levels, which can be used to deliver to the client the promised return should such an event happen as stated on a formulaic basis within the principal protected note.