Structured Bond

A product created by combining bonds and derivatives, where the bond's principal and interest are determined by linkage to underlying assets such as interest rates, stocks, and currencies.

Market participants in structured bonds obtain the same economic effect as trading the derivatives embedded in the structured bonds, such as swaps and options.

Structured bonds usually embed derivatives with option characteristics such as calls, caps, and floors, where typically the investor takes the short position in the derivatives and the issuer takes the long position.

Depending on the type of underlying asset, they can be classified into interest rate-linked bonds, credit-linked bonds, equity-linked bonds, currency-linked bonds, and commodity-linked bonds.

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Topics: Derivatives,Bonds
Category: Wiki/Economy