Product Know-How Yield Enhancement Reverse Convertible
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Reverse Convertible
Your Market Expectations
You expect the Underlying to trade sideways to slightly higher until the Final Fixing Date. Through the investment in a structured product, you wish to achieve attractive yields in the form of coupon payments.Our Proposal
By investing in a Reverse Convertible, you can enjoy a Coupon Rate which is significantly above the risk-free interest rate.
Description
The Single Reverse Convertible offers the Investor a Coupon Rate regardless of the performance of the Underlying during the lifetime of the product
Redemption Scenario 1
The Underlying closes above its Initial Fixing Level on Final Fixing. The Investor receives 100% of the invested capital plus the Coupon Payments.
Redemption Scenario 2
The Final Fixing Level of the Underlying is below its Initial Fixing Level. The Investor receives the Coupon Payments and the Underlying (or a corresponding cash settlement
Component 1
The Investor buys a bond which pays out the Coupon(s) on the Coupon Payment Date(s) and the Denomination on the Redemption Date. This component increases in value if interest rates fall, and decreases in value if interest rates rise.
Component 2
The Investor sells a put option on the Underlying. Through the sale of this put option the Investor receives the put premium, which is paid out in the form of the high Coupon Amount (Option Premium Component). The value of the Put Option increases as the fluctuations of the Underlying (volatility) increase. Should the value of the Underlying fall, the value of the Put increases; seeing as the Investor sold the Put, so the value of the Reverse Convertible falls.
Risks
In the case of physical delivery of the Underlying the Investor may suffer a loss equivalent to that he would have taken had they made a direct investment in the Underlying between the Initial Fixing Date and the Final Fixing Date. The Maximum Yield is limited to the Coupon Rate, assuming the investment is bought at the Issue Price and held until the Redemption Date.
The Investor foregoes income such as dividend payments on the Underlying.
Depending on the Investor’s depository bank, transaction fees may be levied for the delivery of the shares to the Investor’s deposit.
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