An anatomy of Bullish Underlying Linked Securities

Bullish Underlying Linked Securities (BULS) represent another type of equity-linked structured notes. BULS are designed to meet the needs of retail investors, who give up certain upside capital appreciation potential over a period of time in exchange for enhanced principal protection. A BULS valuation model is derived through a replication strategy. The application of the valuation model to a particular BULS issue shows that these BULS were overpriced by the market during the seasoning period, but were fairly priced during the rest of the sample period.