Glossary
Glossary
Alternate Currency (Currency Linked Investment)
The currency in which the investor gives the issuer of a Currency Linked Investment (CLI) the right to return the investor’s principal on maturity of the CLI. The investor in a CLI sells a call option to the issuer of the note, giving the issuer the right to “call” the base currency, converting it at an agreed rate into the alternate currency.
Base Currency (Currency Linked Investment)
The currency in which an investment is placed in a currency linked investment.
Call/Called
When an investor is “called” a security or currency, it means he is contractually obligated to sell that security or currency to the holder of the “call option” at a specific, contracted price.
Callable Bonds
A bond which the issuer can decide to redeem before its stated maturity date. A call date and a call price are always given. You face a risk with a callable bond that it will be redeemed if its stated coupon is higher than prevailing rates at the time of its call date. If that happens, you won't be able to reinvest your capital in a comparable bond at as high a yield.
Currency Linked Investment
A Currency Linked Investment is a dual currency investment that involves a currency option, giving you the opportunity to earn an enhanced yield based on your view of the movements of the exchange rate in the future and the risk undertaken.
Currency Pair
Currencies valued relative to another currency. For example, if the Australian dollar is valued against the US dollar, the currency pair is AUD/USD.
Derivative
A financial product that derives its value from the value of an underlying asset, such as a security (equity, bond), commodity, or currency. Examples of derivative products include options, futures, and warrants.
Final Valuation Date
A date on maturity of the structured note when the prices of reference entities are determined for the purposes of financial settlement.
Fundamental Analysis
Fundamental analysis is a method of evaluating the health and performance of a company by examining related economic, financial and other qualitative and quantitative factors. The purpose is to determine the intrinsic value of the stock.
Initial Price (Structured Products)
The market price at the commencement of a structured note.
Issuer Risk
The risk of the financial instrument issuer defaulting on its debts or financial obligations.
Knock-in
The level/price at which an option contract is activated. In a structured note where the investor has sold a “put” option to the issuer, the issuer can exercise that put option when the “knock-in” price has been hit.
Knock-out
The level/price at which an option contract ceases to exist. An option is “knocked out” when it hits that level/price.
Least Performing Equity (LPE) (Structured Products)
The worst performing stock in a structured note with a basket of underlying or reference stocks.
Leverage
Leverage is the investment strategy of using borrowed capital to increase the potential return of an investment.
Maturity (Structured Products)
The date on which a structured note terminates, and contractual obligations are fulfilled by both investor and the issuer.
Observation Dates (Structured Products)
Agreed dates on which market prices are used to determine the performance of a structured note.
Put
When an investor is “put” a security or currency, it means he is contractually obligated to buy that security or currency from the holder of the “put option” at a specific, contracted price.
Reference Entity (Structured Products)
Any security or market indicator on which a structured note is based. The prices of those securities or market indicators are used to determine the note’s performance.
Spot
Market price at any particular time.
Strike Price
The price at which a call or put option is exercised.
Structured Notes
A type of structured product, structured notes are linked to an underlying asset (such as equity, bond, or index) and are tailored to an investor’s view of the market.
Structured Products
A financial instrument whose performance or value is linked to that of an underlying asset, product, or index.
Technical Analysis
Technical analysis is a method used to understand to evaluate securities and attempt to forecast their future movement by analyzing statistics gathered from trading activity, such as price movement and volume.
Tenor
The term of an investment.
Value Investing
Value investing is an investment strategy where stocks are selected because they are viewed to trade for less than their intrinsic values. Investors who use this strategy believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with a company's long-term fundamentals, giving an opportunity to profit when the price is deflated.