I'm pretty new in structured products area and I have some basics questions regarding autocall :
- Why the autocall has an automatic redemption feature ? I mean an Investor could be interested in earnings coupons during more time if they are attractive. What is the purpose of this calling mechanism ? same question for the bank ?
- Why the calling mechanism should be linked to the underlying level ? How the callable level is calibrated ?
- Could we really consider that the bank is short digital to materialize the calling feature ? Because if the bank is short, that means that it takes the risk to pay 1 * coupon in case the product redeem whereas it has already the coupon in its book (coming from the investment of the D&I option) as a hedge (no risk there)
Sorry if these questions are obvious