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.