What defines structured capital at risk products (SCARPs)?

Structured capital at risk products (SCARPs) are designed to offer investors the opportunity for enhanced returns while exposing them to a certain level of risk. The defining characteristic of SCARPs is that the floors for payouts are variable. This means that the minimum payout or return on investment is not fixed and can change based on market conditions or the underlying assets tied to the product.

This variability allows for the potential of higher returns depending on the performance of the assets involved, but it also means that there is a risk of receiving lower or no returns if the underlying performance does not meet expectations. Investors need to be aware of this feature, as it directly affects their potential risk and return profile.

In contrast, fixed payout ratios or guaranteed returns would negate the essence of a capital at risk product, as they would not allow for the variable aspects that define SCARPs. Similarly, being a non-negotiable debt instrument is not a relevant characterization, as SCARPs can include a variety of structures beyond just debt. Understanding the nature of these products and how they manage risk is crucial for investors.