Capital Protection Products
A floor under your nominal, with an option on top.
Introduction
Every product in this category starts with a zero bond. It costs less than 100 today and pays exactly 100 at maturity; the difference is the interest you would otherwise have earned. That difference is the budget for everything else: a call for participation, a knock-out call for a cheaper participation, or digitals for a coupon.
The floor is the point. Whatever the option does, the bond repays the protection level at maturity, which is why the payoff line in this category never dips below it. Two conditions apply and both matter: the protection holds only at maturity, not on the way there, and only if the issuer is still able to pay.
The price of the floor is the upside you give away. When interest rates are low the bond eats almost the whole nominal and little is left for options; the result is a low participation or a long maturity. When rates are higher, protected notes become generous again. The section on pricing shows the arithmetic.
The products
In workbook order. Each page has an interactive payoff chart and a construction visualiser.
- 1100RisingCapital Protection Note with Participation
Your nominal back at maturity, plus a share of any rise in the underlying.Capital protection - —Slightly risingCapped Capital Protection note with participation
A protected note whose upside stops at a cap, which pays for better terms.Capital protection - 1130RisingCapital Protection Certificates with Barrier and Rebate
Protected capital with participation up to a barrier; touching the barrier swaps the upside for a fixed rebate.Capital protection Barrier - 1135Slightly rising, Falling, Sharp swingsCapital Protection Certificates with Twin-Win
Protected capital that gains from a move in either direction, as long as neither barrier is touched.Capital protection Barrier - 1140RisingCapital Protection with Coupon
Protected capital with a coupon that is paid only if the underlying is above a trigger on the fixing date.Capital protection - 1130FallingCapital Protection Certificate with Knock-Out — Bear
The bear mirror of the barrier certificate: protected capital that gains as the underlying falls, until a lower barrier is touched.Capital protection Barrier - 1130Slightly risingCapital Protection Certificate with Double Knock-Out
Protected capital with participation inside a corridor; touching either barrier ends it.Capital protection Barrier