With every investment, the day of truth comes at some point. Whereas with a direct investment, for example in a share, the holder is free to choose the time of sale, structured products are largely designed for a fixed term. Although they can also be sold on the secondary market at any time, most structures only develop their true earnings potential at the end of their term. The final fixing then determines whether the investment ends with a profit or loss.<\/p>\n
To avoid any unplanned surprises at the end of the investment, it is essential to take a look at the term sheet when buying a structured product. The terms of repayment are described in detail in the termsheet. In order to familiarize you with the relevant technical terms and possible scenarios, in the current issue of \"Leonteq Know-how\" we take a look at the redemptions of Switzerland's favorite child: the Barrier Reverse Convertible (BRC).<\/p>\n
The definitive end of a structured product is determined by the maturity date. On this date, which is fixed before the issue date, the final fixing takes place. Redemption usually takes place a few days later. Investors then receive the respective amount plus coupon credited to their settlement account.<\/p>\n
The amount of the redemption depends on the performance of the underlying instrument. Two scenarios are possible with a BRC. First, the barrier remained intact or second, the threshold was touched. In the first case, the redemption is relatively simple: If no barrier event occurred, the issuer pays back 100 percent of the denomination in cash. This ends the investment with the maximum return, which is determined by the amount of the coupon. However, if the barrier is breached, scenario two occurs. In the event that the underlying closes above the strike price at the end, the issuer again pays back the full nominal amount. Holders therefore achieve the maximum return despite the barrier breach.<\/p>\n