A structured product (structured certificate) that gives the holder an opportunity to avail sideway trends of the market over the short run. The expected dividend payouts are used to finance the so-called security buffer- i.e., the conditional capital protection (principal guarantee) provided by the certificate. This offers capital protection on the initial investment at maturity, provided the price of the underlying(s) does not drop below a predetermined barrier. Otherwise, losses start to accumulate. The holder (investor) will receive a bonus at maturity, depending on the price of the underlying stock(s) at that time, and its (their) performance during the certificate’s life. The payoff of an early repayment certificate depends on the underlying closing above its start value on one of the frequent observation dates. The return is capped on the upside (that is, subject to a cap level).

The certificate consists of a long position in the underlying stock(s) (i.e., a zero-strike call) and a long down-and-out put with a strike price and a barrier).

Early repayment certificates belong to the broader class of equity structured products/ participation products and specifically yield products (yield enhancement products).

Early repayment certificates are also known as bonus certificates.