The standard method of mitigating currency risk within a structured product is to buy the product in "quanto" format. This removes all currency risk between the underlying asset and the currency of the product. Currently it is very expensive for product providers (ie, the banks) to hedge any "quanto risk" between Japanese equities and Sterling, so such structured products do not price attractively at the moment.
We believe that there is an alternative to the quanto method that will deliver better product terms whilst still mitigating currency risk.
