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Structured Products for Retail Investors: Bank of China and the Negative Oil Price

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This case explores how the retail customers of the Bank of China lost an astounding RMB10bn (USD1.27bn) by investing in a structured product. The product, Crude Oil Treasure, was linked to West Texas Intermediate (WTI) futures. These crude oil futures were traded on the New York Mercantile Exchange and were used as a benchmark in oil pricing.

The negative futures price of –USD37.63 per barrel on 20 April 2020 was a “black swan” event. Never before had the price of oil futures plunged into the negative. Through the case, students will grapple with the practical questions of how to identify the characteristics of a structured product by reference to the traits exhibited in a standard futures contract. Students will also be asked questions on finance theories about contango, extreme contango, backwardation, extreme backwardation, normal contango, and normal backwardation.

Year of Publication: 2020
Ref. No.: 20/675C
Discipline: Finance & Investments
Industry: Asset Management and Custody Banks
Country: China (People's Rep. of)
Company: Bank of China
Languages: English
Pages of Text: 6