Capital Protection Certificates with Barrier and Rebate
Protected capital with participation up to a barrier; touching the barrier swaps the upside for a fixed rebate.
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.
Barrier products are path dependent. The chart shows the redemption at maturity given the scenario you select; whether the barrier was touched is decided by the whole price path, not by the final level alone.
- Barrier never touched
Redemption 100 %
Per 10'000 of nominal
| Underlying at maturity | Level | Redemption | Amount | Gain / loss |
|---|---|---|---|---|
| −30 % | 70 % | 100 % | 10'000 | +0 |
| unchanged | 100 % | 100 % | 10'000 | +0 |
| +30 % | 130 % | 130 % | 13'000 | +3'000 |
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
Capital Protection Certificates with Barrier and Rebate (1130), scenario "Barrier never touched": redemption at maturity for an underlying at 0 % → 100 %; 1 % → 100 %; 5 % → 100 %; 100 % → 100 %; 140 % → 105 %; 200 % → 105 % of its initial level.
| Series | Formula | 0 % | 25 % | 50 % | 75 % | 100 % | 125 % | 150 % | 175 % | 200 % |
|---|---|---|---|---|---|---|---|---|---|---|
| Zero Bond | protection level | 100 | 100 | 100 | 100 | 100 | 100 | 100 | 100 | 100 |
| Up and Out Long Call - ATM | if S < barrier: participation × max(S − strike, 0); otherwise 0 | 0 | 0 | 0 | 0 | 0 | 25 | 0 | 0 | 0 |
| Digital Barrier Long Call - OTM | if S ≥ barrier: rebate; otherwise 0 | 0 | 0 | 0 | 0 | 0 | 0 | 5 | 5 | 5 |
| Product | if S ≥ barrier: protection level + rebate; else if S > strike: protection level + participation × (S − strike); otherwise protection level | 100 | 100 | 100 | 100 | 100 | 125 | 105 | 105 | 105 |
Largest difference between the sum of the blocks and the product formula over the grid: 0.0e+0.
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 Bondprotection level
- Up and Out Long Call - ATMif S < barrier: participation × max(S − strike, 0); otherwise 0
- Digital Barrier Long Call - OTMif S ≥ barrier: rebate; otherwise 0
- Product: barrier never touchedif S ≥ barrier: protection level + rebate; else if S > strike: protection level + participation × (S − strike); otherwise protection level
Largest gap between the sum of the blocks and the product formula on this grid: 0.0e+0. The same identity is tested for every product and scenario in the site's test suite.
Construction, as listed in the workbook
- Zero Bond
- Up and Out Long Call - ATM
- Digital Barrier Long Call - OTM
In plain English
The zero bond protects the nominal. The upside comes from an up-and-out call: it pays like a normal call as long as the underlying never reaches the barrier during the term. If the barrier is touched, the call is knocked out and a one-touch digital pays a small rebate instead.
The best outcome is the underlying rising steadily but staying just below the barrier at every fixing. A strong rally that crosses the barrier leaves you with the protection level plus the rebate, which is why the market expectation says "will not rise past the barrier".
Chances and risks
Chances
- Full participation below the barrier.
- A rebate softens the knock-out.
- Capital protection at maturity.
Risks
- A single touch of the barrier removes all participation for the rest of the term.
- Issuer credit risk.
- Protection applies at maturity only.
Who it fits
- Investors who expect a moderate rise and want protection, in exchange for a capped and conditional upside.
Who it does not fit
- Anyone expecting a sharp rally.
- Investors who cannot follow the barrier during the term.
Features that can be added
Cross-category features from the workbook that issuers attach to this type.
Nearby on the map
- 1100Capital Protection ProductsCapital Protection Note with Participation
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A protected note whose upside stops at a cap, which pays for better terms. - 1135Capital Protection ProductsCapital Protection Certificates with Twin-Win
Protected capital that gains from a move in either direction, as long as neither barrier is touched.Barrier - 1140Capital Protection ProductsCapital Protection with Coupon
Protected capital with a coupon that is paid only if the underlying is above a trigger on the fixing date. - 1130Capital Protection ProductsCapital 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.Barrier