A target accrual redemption note (TARN) (basically, a long-dated FX product) which allows counterparties to link to floating-rate benchmarks in the funding currency. This note, as the name implies, has a target redemption mechanism by which the structure knocks out (or is said to tarn out) once the target level is attained. Otherwise, a counterparty continues to receive coupon payments on successive fixing dates. The coupon of the first period (or initial periods) is typically set at an attractive level (say, 10%) and the subsequent coupons make capped payments. The structure terminates automatically after a given coupon brings the note to its target level. At this point the principal is repaid (principal redemption takes place).
It is also termed FX target redemption note, or for short, FX-TARN.
