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. |
