This document discusses mountain range options, a type of structured product. Mountain range options combine characteristics of basket options and range options, basing their value on the performance of multiple underlying assets over a set time period. One type of mountain range option, called an Altiplano, provides a coupon payment if the underlying assets do not reach the strike price, but converts to a standard call option if any asset surpasses the strike. The document provides examples of Altiplano baskets and discusses Société Générale beginning to offer mountain range funds in Asia.

1. STRUCTURED
PRODUCTS
GUIDE
MAKING A
SENSE OUT
OF IT

2. Mountain Ranges
Options
“Mountain ranges are exotic options originally
marketed by Société Générale in 1998. The
options combine the characteristics of basket
options and range options by basing the value of
the option on several underlying assets, and by
setting a time frame for the option.”
Source: Wikipedia
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3. Types of
Mountain Range Option
Mountain
Range
Options
Altiplano Annapurna Atlas Everest Himalaya
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4. Altiplano
The Geographic Definition
“The Altiplano (Spanish for high plain),
in west-central South America, where the
Andes are at their widest, is the most
extensive area of high plateau on earth
outside of Tibet. Lake Titicaca is its best
known geographical feature.”
Source: Wikipedia
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5. Altiplano
The Option Definition
Altiplano - in which a vanilla option is combined with a
compensatory coupon payment if the underlying security
never reaches its strike price during a given period.
A type of basket option, (i.e. there is more than one
underlying security).
Pricing of the option is determined not only by the implied
volatility of each security, but also by the correlations
between them.
Altiplano, is also known as “Comet”.
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6. Altiplano
Payout Features
If none of the underlying securities in the Altiplano
basket outperforms the strike price during the life
of the option, then the option payout is just the
specified coupon.
But if any one of the underlying securities passes
the strike price, then the option converts to a
vanilla call option on each of the underlying
securities or assets. (i.e., the performance of the
basket will be paid)
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7. Example (1)
Altiplano Equity Basket
Stock Basket that consists of 10 blue Barrier = 75%
chip stocks
Coupon = 25%
UBS AG-REG
DEUTSCHE BANK AG-REGISTERED
BNP PARIBAS Payout Structure
AMERICAN INTERNATIONAL GROUP
GENERAL ELECTRIC CO Payoff = 0 if any stock breaches
WAL-MART STORES INC Barrier at any time, else Coupon
CITIGROUP INC Maximum Return = 25%
GOLDMAN SACHS GROUP INC
BANK OF AMERICA CORP
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8. Example (2)
Altiplano Equity Basket
Stock Basket that consists of 10 blue Barrier = 75%
chip stocks
UBS AG-REG Payout Structure
DEUTSCHE BANK AG-REGISTERED
BNP PARIBAS Year 1 Coupon = 10% if Barrier
AMERICAN INTERNATIONAL GROUP not activated
GENERAL ELECTRIC CO Year 2- 3 Coupon = 10% if
WAL-MART STORES INC Barrier not activated
CITIGROUP INC
GOLDMAN SACHS GROUP INC
BANK OF AMERICA CORP
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9. SG to offer 'mountain range' funds
in Asia
• SG, the securities division of French bank Société Générale, has begun
rolling out its ‘mountain range’ series of capital guaranteed funds in Hong
Kong, four years after they made their first appearance in the European
market.
• Another mountain range product to make its debut in the Hong Kong
market is Altiplano, launched in the guise of SG’s Double Chance
Guaranteed Fund last month after a month-long offer period. This fund
offers a 200% return on capital over 4.5 years, or participation in the
performance of a basket of 15 stocks with a 100% capital guarantee.
Investors can achieve the 200% return if none of the underlying stocks
falls below 62% of its initial value between November 2004 and
November 2006.
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Extracted from: Risk.net, “SG to offer ‘mountain range’ funds in Asia, by Nick Sawyer, 31 May 2002

10. Conclusion
The different payout structure offered by
structured products provide a huge range
of choices to investors. As such, investors
need to know, the risk and returns of each
structure to make proper investment
decisions.
Contact: ngkaichong@yahoo.com
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