An accrual note (accumulation note) in which the initial price is below par, while it has a zero-coupon or very low rate. To compensate investors, the note comes with an interest accrual mechanism embodied in an embedded range accumulation option. A note holder receives a total redemption payment that is capped at par with automatic maturity and principal redemption. The note return depends on an investor’s ability to forecast the range of underlying interest rate.
July 10, 2024
