Structured Investments Glossary
This glossary is for general information only, in the context of structured products. It should not be relied upon as legal or professional advice. Whilst reasonable care has been taken to ensure the accuracy of the information herein, no warranty or representation is made as to its correctness or completeness. Content herein may be modified at any time without notice.
| Term | Description |
|---|---|
| Alternate currency | The currency in which the investor gives the issuer of a Currency Linked Investment 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 | 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. |
| Capital gains | Profits on an investment. |
| Coupon | The interest payable on a financial instrument, expressed as a percentage of the face value of the investment. For example, if an investment has a face or nominal value of S$100,000 and it has a coupon rate of 5%, the investment should pay total income of S$5,000 a year. |
| Currency pair | Currencies valued relative to another currency. If the Australian dollar is valued against the US dollar, the currency pair is AUD/USD. |
| 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. |
| Initial price | 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. |
| Knocked-out | When an option contract hits the knock-out level/price. |
| 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. |
| Least performing equity (LPE) | The worst performing stock in a structured note with a basket of underlying or reference stocks. |
| Maturity | The date on which a structured note terminates, and contractual obligations are fulfilled by both investor and the issuer. |
| Observation Dates | Agreed dates on which market prices are used to determine the performance of a structured note. |
| Principal | The original amount of any investment. |
| 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 | 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. |
| Tenor | The term of an investment. |
| Yield | The earnings/income generated by any investment or asset, expressed as a percentage of the investment per year. |