What are Higher Yield Notes?
Higher Yield Notes provide investors with periodic fixed coupon
payments while basing the payout at maturity on the performance
of an underlying asset. In some cases, investors may be delivered
the underlying asset at maturity.
The fixed coupon payments typically are higher than the yield
payable on a conventional debt security with a comparable issuer,
maturity and credit rating.
Investors give up, or ‘trade off’, some or all
of the upside exposure in the underlying asset in order to benefit
from the enhanced coupons.
Any underlying asset delivered at maturity will have a cash
value below the original principal amount of the notes, possibly
significantly below, and such value could be zero.
In this Section
* Higer Yield Notes
* Reverse Exchangeable Securities
* Knock-in Reverse Exchangeable Securities
Higher Yield Notes are not principal protected; therefore, 100%
of principal will be at risk. This means that investors may
lose some or all of their initial investment in the notes if
the underlying asset declines in value.
Higher Yield Notes may be linked to a variety of asset classes,
but are typically linked to single stocks.
The amount payable under Higher Yield Notes will never exceed
the original principal amount of the notes plus the aggregate
fixed coupon payments investors earn during the term of the
notes. This means that investors will not benefit from any price
appreciation in the underlying asset nor will they receive dividends
paid on the underlying asset, if any.
Higher Yield Notes may be an appropriate investment for investors
seeking enhanced yield who are willing to take the risk of loosing
some or all of their initial investment, risk owning the underlying
asset at maturity and who think that the underlying asset will
trade in a range during a given period.