What are structured products based on?

Structured products are financial instruments that are designed to meet specific investment needs by combining traditional securities, such as stocks and bonds, with derivatives. The correct answer highlights that structured products are primarily based on derivatives, which can include a variety of underlying assets, such as financial securities and commodities.

Derivatives are contracts whose value is derived from the performance of an underlying asset, index, or rate, which makes them versatile for creating tailored investment solutions. Structured products can be designed to provide customized risk-return profiles, often layering features such as capital protection, leveraged exposure, or market participation depending on the investor's goals.

In contrast, other options suggest narrower bases for structured products. Government bonds and stock options do form part of the broader financial landscape, but they alone do not encompass the full nature of structured products. Real estate investments and insurance products relate to different investment vehicles and types of risk management, but they are not the foundational elements that structured products rely on. Thus, the emphasis on derivatives as a core component solidifies why the correct response points to them as the base of structured products.