Barrier Reverse Convertible with Conditional Coupon
The barrier reverse convertible with conditional coupons and, usually, an autocall.
Payoff at maturity
Move the parameters; the product formula and its building blocks are recomputed from the same engine that is tested against the workbook.
Both the barrier and the autocall are path dependent. The chart is the payoff at the final fixing, given the selected barrier scenario and no early redemption.
- Barrier never touched
Redemption 108 %
Per 10'000 of nominal
| Underlying at maturity | Level | Redemption | Amount | Gain / loss |
|---|---|---|---|---|
| −30 % | 70 % | 100 % | 10'000 | +0 |
| unchanged | 100 % | 108 % | 10'800 | +800 |
| +30 % | 130 % | 108 % | 10'800 | +800 |
Coupons are shown as paid at maturity together with the nominal. Costs, taxes and the price you paid are not included. Scenario: Barrier never touched.
Data table and formulas
Barrier Reverse Convertible with Conditional Coupon (1260), scenario "Barrier never touched": redemption at maturity for an underlying at 0 % → 0 %; 8 % → 8 %; 65 % → 65 %; 80 % → 108 %; 100 % → 108 %; 200 % → 108 % of its initial level.
| Series | Formula | 0 % | 25 % | 50 % | 75 % | 100 % | 125 % | 150 % | 175 % | 200 % |
|---|---|---|---|---|---|---|---|---|---|---|
| Zero Bond | 100 | 100 | 100 | 100 | 100 | 100 | 100 | 100 | 100 | 100 |
| Short Down and In Put - ATM | if S ≤ barrier: −(100 ÷ strike × max(strike − S, 0)); otherwise 0 | -100 | -75 | -50 | 0 | 0 | 0 | 0 | 0 | 0 |
| Long Cash-or-Nothing Call - OTM | if S ≥ coupon trigger: coupon; otherwise 0 | 0 | 0 | 0 | 0 | 8 | 8 | 8 | 8 | 8 |
| Product | (if S ≤ barrier: 100 × S ÷ strike; otherwise 100) + (if S ≥ coupon trigger: coupon; otherwise 0) | 0 | 25 | 50 | 100 | 108 | 108 | 108 | 108 | 108 |
Largest difference between the sum of the blocks and the product formula over the grid: 2.7e-15.
How it is built
Each block drawn on its own, then added. The last chart is the sum, and it is identical to the product line above.
- Zero Bond100
- Short Down and In Put - ATMif S ≤ barrier: −(100 ÷ strike × max(strike − S, 0)); otherwise 0
- Long Cash-or-Nothing Call - OTMif S ≥ coupon trigger: coupon; otherwise 0
- Product: barrier never touched(if S ≤ barrier: 100 × S ÷ strike; otherwise 100) + (if S ≥ coupon trigger: coupon; otherwise 0)
Largest gap between the sum of the blocks and the product formula on this grid: 2.7e-15. The same identity is tested for every product and scenario in the site's test suite.
Construction, as listed in the workbook
- Zero Bond (face = nominal)
- Short Down and In Put - ATM
- Long Cash-or-Nothing Call - OTM (strike = Coupon Trigger, pays the coupon) - one per observation date
- Note: the autocall (early redemption) is path dependent and is not part of the static replication - see Notes
In plain English
Three things are combined: a zero bond, a short down-and-in put that only activates if the barrier is touched, and one digital per observation date that pays the coupon when the underlying is at or above the trigger.
The product is typically autocallable. Early redemption is not in the static construction; the chart shows the final fixing given that no call happened. This is the most common structure in the Swiss market and also the hardest to value by hand.
Chances and risks
Chances
- High conditional coupons.
- Nominal repaid if the barrier holds.
- Early redemption when the underlying recovers.
Risks
- Coupons can be missed.
- After a barrier touch, losses below the strike are one for one.
- Issuer credit risk; reinvestment risk after an autocall.
Who it fits
- Investors who expect a range-bound to slightly rising market and want income with a buffer.
Who it does not fit
- Investors who need certain coupons or a hard floor.
Features that can be added
Cross-category features from the workbook that issuers attach to this type.
Nearby on the map
- 1200Yield Enhancement ProductsDiscount Certificate
The underlying bought at a discount, in exchange for giving up gains above a cap. - 1210Yield Enhancement ProductsDiscount Certificate with Barrier
A discount certificate that repays the cap in full as long as the barrier is never touched.Barrier - 1220Yield Enhancement ProductsReverse Convertible
A fixed coupon in every case; the nominal is repaid only if the underlying ends at or above the strike. - 1230Yield Enhancement ProductsBarrier Reverse Convertible
A reverse convertible with a safety barrier: the nominal is repaid unless the barrier was touched and the underlying ends below the strike.Barrier - 1255Yield Enhancement ProductsReverse Convertible with Conditional Coupon
A reverse convertible whose coupon is paid only when the underlying is above a trigger on the observation date; usually with early redemption.