A power reverse dual currency note (PRDC note) that gives the issuer (a bank, for example) the right to call the structure (i.e., terminate it before maturity date). This involves, in other words, a termination feature (call option) that becomes effective on a pre-agreed bunch of termination dates. A standard callable PRDC note, with a maturity of 30 years, may be structured so that it pays coupons in a foreign currency while the principal is repaid in the domestic currency (originally, yen). The note coupon (a non-zero coupon) fluctuates with prevailing exchange rates, and the principal redemption could occur anytime over the note’s life. For example, a PRDC note may pay an annual coupon which equals to 5% in the first year and thereafter it is subject to maximum limit of (15 x USDJPY/115- 10, 0)% and is callable at par on each of the coupon payment dates. In view of the fact that the main risk to issuers is a depreciating domestic currency, PRDC notes can help mitigate this risk by providing issuers with the option to call them at par.

Without the call option, this note is basically a strip of FX options.