From the Collaborative Bond and Money Market Data Portal.
A structured note combines a Debt Instrument with an option. In its very basic form the discounted value of the coupon is used to buy an option. Instead of a coupon the investor receives a play on the value of an asset to which the option relates. One could also define a structured note as a note that is not a vanilla.
A structured note therefore not only exposes the investor to the standard risk associated with a debt instrument, such as the credit risk of the issuer that has issued the note but also to additional types of investment risks. In line with this and depending on pay-off or what type of asset the options embedded within the structured note are linked to, these type of debt instruments can also be classified as either:
- Interest Rate Linked (IR Linked)
- Equity Linked (EQ Linked)
- Foreign Exchange Linked (FX Linked)
- Commodity Linked (CM Linked)
- Credit Linked (CR Linked) or
- Inflation Linked
All of these type of debt instruments are structured notes.
Structured notes, that only use the discounted value of the coupon to achieve these plays are principal protected. This means that the investor receives their principal investment or their money back irrespective of how the option has performed. In not principal protected Structured Notes, the investor also runs an investment risk with their original investment. A very popular principal at risk structured note is the Reverse Convertible. In a Reverse Convertible, the investor has sold an option and in return receives a higher coupon.
Structured Notes should be distinguished from Asset Backed Securities, which in the CMDportal datamodel and system are classified by Industry Sector.
In the Collaborative Bond and Money Market Data Model the Structured Note classification appears within the field Structure Group.
Based on available data, on the 1st of May 2017, the size of the International Structured Note Market was USD 6.7trillion.
For information on the current size and composition of the Structured Note Market, please use CMDportal's data sheet tool.
For information on active issuers in the Structured Note Market, please use CMDportal's issuer search tool or custom league table tool.
For information on active dealers in the Structured Note Market, please use CMDportal's dealer search tool or custom league table tool.
For information on issues in the Structured Note Market, please use the Instrument search tool.
