A structured product that provides a predefined yield in return for a downside risk. If the price or rate of underlying asset/ index closes at or above a certain level, the holder will receive a fixed income payment. Such products typically consist of two elements: a fixed-income investment and an option- usually on equities or currencies. This allows the investor to participate in the “capped” performance of an underlying or more by means of the option component. By nature, yield enhancement products provide no minimum repayment, , or if any it would be conditional. The enhancement yield (higher return) comes from the interest paid or discount provided on the issue price, compared with that offered by a direct investment if the price of the underlying remains mainly unchanged.

On the upside, if the price of the underlying rises- up to a limit or cap, the holder will receive the interest and nominal value paid out on expiration date. Conversely if the price falls sharply, the holder would receive a cash settlement or physical delivery of the underlying on expiration, while participating in any negative performance of the underlying (downside risk).

Examples of yield enhancement products include callable yield notes (CYN), equity-linked investment notes (ELIN), equity-linked notes (ELN), discount certificates (DC), barrier discount certificates (BDC), barrier reverse convertibles (BRC), dual currency investment (DCI), etc.

A yield enhancement product is known for short as YEP.