Capital Protection with Coupon
Protected capital with a coupon that is paid only if the underlying is above a trigger on the fixing date.
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.
- Product
Redemption 104 %
Per 10'000 of nominal
| Underlying at maturity | Level | Redemption | Amount | Gain / loss |
|---|---|---|---|---|
| −30 % | 70 % | 100 % | 10'000 | +0 |
| unchanged | 100 % | 104 % | 10'400 | +400 |
| +30 % | 130 % | 104 % | 10'400 | +400 |
Coupons are shown as paid at maturity together with the nominal. Costs, taxes and the price you paid are not included.
Data table and formulas
Capital Protection with Coupon (1140): redemption at maturity for an underlying at 0 % → 100 %; 4 % → 100 %; 100 % → 104 %; 200 % → 104 % 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 |
| Combination of Cash or Nothing Options | if S ≥ coupon trigger: coupon; otherwise 0 | 0 | 0 | 0 | 0 | 4 | 4 | 4 | 4 | 4 |
| Product | if S ≥ coupon trigger: protection level + coupon; otherwise protection level | 100 | 100 | 100 | 100 | 104 | 104 | 104 | 104 | 104 |
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
- Combination of Cash or Nothing Optionsif S ≥ coupon trigger: coupon; otherwise 0
- Productif S ≥ coupon trigger: protection level + coupon; 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
- Combination of Cash or Nothing Options with different maturities and different strikes
In plain English
The zero bond protects the nominal. Instead of a call, the option budget buys cash-or-nothing options, one per coupon date. Each one pays the coupon if the underlying is at or above the coupon trigger on that date, and nothing otherwise.
The payoff at maturity is a step: the protection level below the trigger, the protection level plus the coupon above it. Earlier coupons depend on earlier fixings and are not visible in a chart drawn at maturity.
Chances and risks
Chances
- Income-like coupons when the view is right.
- Capital protection at maturity.
- No participation to cap.
Risks
- A fixing just below the trigger means no coupon at all for that period.
- No participation in large rises: the coupon is the whole upside.
- Issuer credit risk.
Who it fits
- Investors who want regular, conditional income with a protected nominal.
Who it does not fit
- Investors who expect a strong rise and want to take part in it.
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
Your nominal back at maturity, plus a share of any rise in the underlying. - —Capital Protection ProductsCapped Capital Protection note with participation
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Protected capital with participation up to a barrier; touching the barrier swaps the upside for a fixed rebate.Barrier - 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 - 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