Glossary
Barrier Reverse Convertible
A Barrier Reverse Convertible is a structured yield enhancement product that offers periodic coupon payments but carries a risk of loss if the underlying asset breaches a defined barrier. In that case, the holder receives the underlying asset or its equivalent at maturity instead of the nominal amount.
At a glance
- The coupon is paid regardless of the underlying asset's performance; the capital, however, is not protected.
- If the barrier is touched or breached, the holder risks significant losses up to total loss.
- The product is often used for sideways-trending to mildly rising markets with limited volatility.
Frequently asked questions
Barrier Reverse Convertibles can generate ongoing income in sideways-trending markets. The key risk is capital loss when the underlying asset falls sharply below the barrier. Issuer Risk also applies. High coupons generally indicate an elevated risk profile.
Part of the topic
AMC & Structuring
