A structured investment product which combines a guaranteed payoff with a bonus amount equal to the accumulation of capped periodic returns of a given portfolio. The structure has an embedded option that limits the upside potential of the product, for particular intervals over its life. An example is the principal protected notes which provide a guaranteed downside protection on the investment or reference portfolio (the principal amount). However, it comes at a cost: no unlimited participation in the upside potential of the underlying investment.

The underlying investment/ reference portfolio is said to be locally capped when there is a maximum return limit per a specific period of time (one month, one quarter, etc), say 10% for one quarter, regardless of how well the underlying investment/ portfolio performed our outperformed during that period.