Bank Austria Creditanstalt plans to start offering equity-linked notes to Polish, Czech and Hungarian investors within the next month. Andreas Fleischmann, head of fixed income and derivatives and financial engineering in Vienna, said the demand for the products comes from investors, such as pension funds, looking for yield enhancement.
However it was not able to offer the products before because there was not a liquid interest rate and foreign exchange derivatives market. A typical note will pay the performance of a western equity index, such as the Standard & Poor's 500, and use quanto options to pay out in to the local currency. A quanto option adjusts the notional amount of the currency coverage to cover changes in the foreign currency value of the equity.
