When a structured note moves and nothing has happened
A note can reprice by several points on a day the underlying barely moves. Most of the time the explanation is not the spot — it is volatility, dividends, funding, or the calendar.
Philippe Trocellier — Founder — TP Advisory Services
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The most common valuation question from an investor is also the hardest one to answer quickly: the index closed flat, so why is the note two points lower? The answer is almost always that spot is only one of the inputs, and rarely the one that moved most.
The decomposition
Attributing a valuation change to its drivers is the same exercise as explaining a P&L: take the change in price and allocate it across the sensitivities that produced it.
- Delta and gamma — the part that genuinely comes from the underlying.
- Vega and the volatility surface — often the dominant term for autocallables.
- Theta and the passage of time, which is not neutral near a barrier.
- Rates, funding and issuer credit, which move the discounting rather than the payoff.
- Dividend expectations, which sit inside the forward and rarely make the headlines.
Why autocallables are the awkward case
Path dependency means the sensitivities themselves change with the path. Near an observation date, a small move in spot changes the probability of early redemption, which changes duration, which changes every other sensitivity at once.
What to give the investor
- An attribution that reconciles to the total change, not a narrative.
- The valuation assumptions, stated explicitly and unchanged between reports.
- Distance to the relevant barrier, expressed in the units the investor thinks in.