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You are here: Structured products glossary

Structured products glossary

The payoff types are defined below:

A return based on a fixed coupon at maturity provided none of the assets in the basket have fallen. If, however, a specified number of the elements in the basket did fall then the return is calculated on a different basis, usually by a call type payout. More complicated products offer different participations based on the number of assets which break a predetermined barrier.

A return based on the maximum of a coupon or a participation in the growth of the underlying. The later the assets which make up the underlying cross a predetermined barrier level the higher the participation in the growth of the underlying.

A return based on the best performing asset(s) of an underlying basket. Usually the best performer(s) in a specified period are used to contribute to a final averaged growth value and then eliminated from the underlying basket.

A return based on a percentage of the rise, as well as a percentage of the fall, in the underlying.

A return based on a fixed participation in the rise of an underlying market that is capped at a fixed return.

A return based on the sum of the rise in an underlying market over sub-periods within the product term typically with a cap on the maximum return in each sub-period.

Constant Proportion Portfolio Insurance (CPPI). An investment strategy whereby funds are allocated dynamically between two types of assets, a risky asset (equity, managed funds) and a non-risky asset (cash, bonds). The allocation is determined by a prescribed formula and designed to preserve capital at a future date.

A product linked to the risk of default (credit risk) from usually a basket of companies.

A product paying a fixed return based on the performance of the underlying. Typically if it rises a high fixed return is paid, if not then a lower return is paid.

An income product where the return of capital depends on the underlying not falling below a certain level over the term. Any falls below this level reduce the return to a pre-determined level.

A return based on the actual dividend yield on the underlying index or shares.

A Cliquet product where negative as well as positive returns in each sub-period are included in the calculation of the overall return.

A return based on a sophisticated combination of two or more product types. They include a wide variety of options with non-standard payout structures or other unusual features.

A Reverse Convertible where the participation in any falls in the underlying below a certain level are greater than 1:1.

A feature whereby a product matures early if the underlying reaches a pre-defined level at a pre-defined date.

If the price of the underlying assets rises above a certain threshold level during the product term, investors are then guaranteed a minimum payout at maturity, even if the price subsequently falls. There may be a number of such steps. Investors can therefore lock in the increase in value.

A return based on a proportion of the highest level reached by the underlying during the term.

A product paying a fixed coupon plus the worst of the performance of a basket of underlying shares or indices.

A return based on a series of coupons. The value of each coupon is determined by the number of assets (usually stocks) which meet certain performance criteria. The coupons are rolled up and paid out at maturity.

A return based on the performance of an active trading strategy that allocates funds dynamically been the underlying assets and a lower risk asset such as cash or bonds.

A return on an Income product in which a small fall in the underlying can result in a large reduction on the capital return.

A Growth product that provides a return linked to both the rise and fall in the underlying but typically with a fixed return of capital for a limited fall in the underlying.

A return based on the performance of a basket whose best performing assets are weighted more heavily than those which perform less well. The underlying is typically a basket of sector or regional indices.

A return based on the time that the underlying remains in a fixed range.

An Income product where the return of capital depends on the underlying not falling below a certain level over the term. Any falls below this level reduce the return on a 1:1 basis.

A return based on a fixed participation in the rise of an underlying market that is uncapped.

A derivative contract referenced to the actual historic volatility of a reference share or index.

A return based on a fixed participation in the rise of the underlying, averaged by the final level of the underlying as opposed to the initial level, used in the corresponding standard call option.

A return based on the worst performing share or index in a basket.


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