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+Chapter 32: Structured Products 595 
+having your money in the bank. Forgetting structured products for a moment, this 
+means that stocks in general would have to increase in value by over 40% during the 
+seven-year period just for your performance to beat that of a bank account. 
+In this sense, the cost of the imbedded call option in the structured product is 
+this lost interest - 4.19 or so. That seems like a fairly expensive option, but if you con­
+sider that it's a seven-year option, it doesn't seem quite so expensive. In fact, one 
+could calculate the implied volatility of such a call and compare it to the current 
+options on the index in question. 
+In this case, with the stock at 10, the strike at 10, no dividends, a 5% interest 
+rate, and seven years until expiration, the implied volatility of a call that costs $4.19 
+is 28.1 %. Call options on the S&P 500 index are rarely that expensive. So you can see 
+that you are paying "something" for this call option, even if it is in the form of lost 
+interest rather than an up-front cost. 
+As an aside, it is also unlikely that the underwriter of the structured product 
+actually paid that high an implied volatility for the call that was purchased; but he is 
+asking you to pay that amount. This is where his underwriting profit comes from. 
+The above example assumed that the holder of the structured product is par­
+ticipating in 100% of the upside gain of the underlying index over its striking price. 
+If that is not the case, then an adjustment has to be made when computing the price 
+of the imbedded option. In fact, one must compute what value of the index, at matu­
+rity, would result in the cash value being equal to the "money in the bank" calcula­
+tion above. Then calculate the imbedded call price, using that value of the index. In 
+that way, the true value of the imbedded call can be found. 
+You might ask, "Why not just divide the 'money in the bank' formula by the par­
+ticipation rate?" That would be okay if the participation were always stated as a per­
+centage of the striking price, but sometimes it is not, as we will see when we look at 
+the more complicated examples. Further examples of structured products in this 
+chapter demonstrate this method of computing the cost of the imbedded call. 
+PRICE BEHAVIOR PRIOR TO MATURITY 
+The structured product cannot normally be "exercised" by the holder until it 
+matures. That is, the cash surrender value is only applicable at maturity. At any other 
+time during the life of the product, one can compute the cash surrender value, but 
+he cannot actually attain it. What you can attain, prior to maturity, is the market price, 
+since structured products trade freely on the exchange where they are listed. In actu­
+al fact, the products generally trade at a slight discount to their theoretical cash sur­
+render value. This is akin to a closed-end mutual fund selling at a discount to net