An abbreviation for foreign exchange target redemption note (also termed: FX target accrual redemption note); a long-dated FX product which allows counterparties to link to floating-rate benchmarks in the funding currency. This target redemption note (TARN), 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).
