Barrier Reverse Convertible

advanced
yield enhancementbarrierreverse convertible

Enhanced yield product with conditional capital preservation. If the barrier is never breached, you get full principal plus an enhanced coupon.

Parameters

70%
40%95%
100%
80%120%
10%
1%30%
12mo
1mo36mo

Payoff at Expiry

ProfitLoss
parStrike 100%Barrier 70%33k50k67k83k100k117k30%50%70%90%110%130%150%Final Level (%)$110,000
100%
30%150%
Payoff
$110,000
P&L
+$10,000
Annualized
+10.0% p.a.
Barrier
INTACT
Coupon Earned
$10,000

Scenario Analysis

How BRC Works

A BRC combines a note or bond with a short knock-in put option sold by the investor to the issuer. The coupon is always paid regardless of market direction.

BARRIER NOT BREACHED

Full principal returned + enhanced coupon. Maximum yield scenario.

BARRIER BREACHED & BELOW STRIKE

Principal reduced based on underlying performance. Coupon still paid.

Investment View (Section 6.6.2)

  • Neutral view on direction
  • Flat to very slight movement up/down with falling volatility
  • Underlying won't breach barrier
  • Income or enhanced yield seeking

BRC vs FCN vs Plain Deposit

FactorBRCFCNDeposit
CouponEnhanced (5-15%)Fixed (5-25%)Market rate
Capital protectionConditional (barrier)Conditional (barrier)Full
Embedded optionShort knock-in putShort putNone