A dual currency bond whose interest payment and principal repayment (redemption amount) depend on the exchange rate between two currencies on the date of payment. In other words, the bond’s coupon is equal to the difference between two amounts denominated in different currencies. For example, a bond might be structured to pay 10% in dollars on a fixed amount of dollars less 5% in yen on a fixed amount of yen. This is equivalent to a position in which two units of a dollar-pay bond are bought (long) and one unit of a yen-pay bond is sold (short). The size of the payments will be affected by an exchange rate movement in a leveraged, rather than simple, manner.

This bond is also known as a combination bond.