Glossary: The A to Z of certificates

Definitions and terms from the world of certificates

 

A | B | C | D | EF | G | H | I | J K | L | M | N

O | P | Q | R | S | T | U | V | W | X | Y | 

A

Adjusted Return: The deduction of a fixed annual dividend from the index is called Adjusted Return. This deduction is made daily on an aliquot basis and eliminates any dividend uncertainties. The abbreviation is AR. As an example, the Solactive® Metaverse Technology and Services EUR Index is 3.5% AR.

Annual Interest Payment Dates: In the case of Certificates with a fixed interest rate, investors receive payment of the fixed interest rate and any extra interest rates on the annual interest payment dates specified in advance

Annualization: In the financial world, yields/interest rates are usually annualized (p.a.). This means that the yields/interest rates are annualized. Annualization makes it easier to compare financial products with different maturities.

Annual valuation days: On the annual valuation days, the respective underlying price is compared with the payout level for express certificates. There is either an early redemption of the certificate if the underlying price is at or above the payout level, or an extension of the term by one year - up to the maximum maturity date - if the underlying price is below the corresponding payout level. The annual valuation days are determined in advance.

Ask price: The ask price is the price at which the certificate can be purchased by the investor. See also bid price.

B

Bail-in: Bail-in refers to the participation of creditors of a credit institution (i.e. investors in its debt instruments) in its losses in the event of reorganization or resolution in the event of imminent insolvency. The Federal Act on the Recovery and Resolution of Banks ("BaSAG") regulates, among other things, the participation of creditors of a bank in the event that the bank becomes distressed and is wound up under supervisory law. Holders of certificates may be affected by such a regulatory measure in the event of an officially imposed resolution, i.e. their claims as holders of certificates against the bank may be written down in whole or in part or certificates may be converted into equity capital of the bank. For further information, please visit www.rcb.at/en/basag.

Barrier: The barrier of a bonus certificate is the price threshold which the underlying asset may neither touch nor fall below during the term in order for the bonus mechanism to remain intact. If the barrier is breached, the bonus mechanism is suspended and the investor is exposed to the full market risk.

Barrier observation: The barrier is observed in order to determine whether this price threshold is touched or undercut. This can be done in three ways:
Continuous observation: Every price of the underlying is used.
Daily observation: Only the daily closing prices are decisive.
Final value: Only the closing price of the underlying on the last valuation day is relevant.

Bearer bond: From a legal point of view, certificates are bearer bonds of the issuer and thus represent freely tradable financial instruments.

Benchmark index: A benchmark index serves as a reference value, for example for a specific region or for a specific industry. For example, the EURO STOXX 50® Index serves as a benchmark for the Eurozone economy and the STOXX® Europe 600 Automobiles & Parts Index serves as a benchmark for the European automotive industry.

Bid price: The bid price is the price at which the certificate can be sold by the investor. See also ask price.

Bond: Bonds are capital protection certificates whose payout is dependent on the performance of the underlying instrument at a specific, predefined payout level. Bonds can also have a variable or fixed interest rate.

Bonus certificate: Bonus certificates allow the investor to invest in an underlying asset with reduced risk. Usually this is a share or an index. Classic bonus certificates are equipped with a barrier and a bonus level (or fixed interest rate). The barrier is set below, the bonus level above the starting value of the underlying. Bonus certificates show their strengths especially in sideways markets. For more information, please see our product category brochure. Download PDF now.

Bonus level: The bonus level for a bonus certificate is the price threshold of the underlying at which the certificate is redeemed, provided the barrier has not been breached during the term.

Break-even (warrant): In the case of warrants, the term break-even refers to the price of the underlying asset at which the profit on the warrant equals the cost of purchasing it.

C

Call: A "call" is a warrant that theoretically gives the investor the right to buy the underlying security - taking into account the subscription ratio - at a predetermined price at a certain point in time (European exercise) or during a certain period (American exercise). See also put.

Cap: The cap represents the price of the underlying of a certificate up to which the investor can participate and thus corresponds to the maximum amount (maximum payout amount). In the case of bonus certificates, the cap usually corresponds to the bonus level.

Capital protection certificate: Capital protection certificates offer protection for the invested capital at maturity and are therefore particularly suitable for safety-oriented investors as an entry product into the world of securities. Underlyings are usually indices, individual shares or futures contracts on commodities. You can find more information in our product category brochure. Download PDF now.

Certificates: Certificates are financial instruments that relate to an underlying asset (e.g. shares, indices, commodities). From a legal perspective, they represent bearer bonds of the issuer and are therefore subject to issuer risk. There are certificates for every market scenario - investors can bet on rising, falling or sideways-running markets. Certificates are considered to be extremely transparent financial instruments, as a predefined payout profile is already set at the beginning of the term. This means that investors know at all times how the redemption will be made at maturity depending on the underlying. Raiffeisen Centrobank roughly divides certificates into the following categories:

Investment products: Capital protection certificates, bonus certificates, express certificates, discount certificates and reverse convertibles.
Leverage products: Warrants, factor certificates and turbo certificates.

Certificate Savings: In certificate savings, the investor pursues the gradual accumulation of assets. A fixed amount of money is invested regularly (monthly). The term is unlimited. More information: www.rcb.at/en/certificate-saving

Corporate bonds: Corporate bonds are debt instruments issued by companies. The coupon of a corporate bond depends, among other things, on the general interest rate level and the credit rating of the issuer. In other words, bonds issued by companies with a lower rating are considered riskier and therefore usually have a higher coupon.

Currency risk: If the cash flows from the certificate are later converted into another currency, additional risks as well as opportunities arise from possible exchange rate fluctuations due to the nominal amount in the foreign currency. This applies to certificates from our product range that are not quoted in euros.

D

Decrement: The deduction of a fixed annual dividend from the index is called a decrement. This deduction is made daily on an aliquot basis and eliminates any dividend uncertainties.
As an example, the MSCI World Climate Change 4.5% Decrement Index.

Delta: The delta indicates by how much the price of a warrant changes if the price of the underlying increases by one unit. For calls, the delta ranges between 0 and +1, for puts between 0 and -1.

Derivatives market: The derivatives market is the complement to the spot market. On the futures market, a transaction is not settled until a future date.

Discount certificate: Discount certificates allow investors to invest in a stock at a discount to the current market price. In return, the investor participates in price increases of the share only up to the cap (= upper limit). For more information, please refer to our product category brochure. Download PDF now.

Distance to barrier: The distance to the barrier is also referred to as the safety buffer and indicates the distance of the current underlying price from the barrier in percent. See also Barrier.

E

ESG: The acronym ESG (Environment, Social, Governance) has become established as the standard for sustainable investment. This refers to environmental, social and corporate indicators in measuring the sustainability and social impact of an investment. These so-called ESG factors thus place environmental, social and governance considerations at the heart of an investment.

Exercise type: The exercise type for warrants indicates whether the warrant can be exercised during the entire term (American) or only at the end of the term (European).

Exercise price: In the case of warrants, the exercise price (also known as the "strike price") is theoretically the price at which - taking into account the subscription ratio - the underlying can be purchased (call) or sold (put) on the exercise date (or during the term in the case of American warrants). In practice, however, exercise of a warrant does not result in physical delivery of the underlying, but in redemption in the form of cash settlement at the intrinsic value.

Express certificate: In the case of express certificates, there is an annual opportunity for early redemption at a predefined payout price during the term if the underlying asset is quoted above or at the defined payout level on one of the annual valuation dates. If the underlying quotes below the payout level on the annual valuation date, the term is extended by a further year to a maximum of the regular maturity date, with the possible payout price increasing by a fixed percentage. For more information, please see our product category brochure. Download PDF now. 

F

Factor certificate: Factor certificates enable investors to participate in the daily performance of an underlying on a leveraged basis. They have a constant leverage at all times, an unlimited maturity and no knock-out threshold (unlike turbo certificates). Unlike warrants, the volatility of the underlying asset has no influence on the pricing of the certificate. For more info, see our product category brochure. Download PDF now.

Factor level: The factor level is adjusted daily to ensure a constant leverage factor. The factor level determines the amount that is financed (long) or invested (short) by the issuer.

Final value: The final value is the closing price of the underlying on the last valuation date against which the starting value at maturity or on the last valuation date is compared.

Fixed interest rate: Some certificates, such as reverse convertibles, have a fixed interest rate. The fixed interest rate is paid out periodically, usually annually, in any case, regardless of the performance of the underlying asset.

G

Gamma: The gamma indicates by how much the delta of an option changes if the price of the underlying changes by one unit.

Guarantee certificate: A guarantee certificate is a capital protection certificate with at least 100% capital protection at maturity. For more information, see our product category brochure. Download PDF now.

H

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I

Index: An index reflects the performance of several shares. Indices often refer to specific regions (e.g. ATX, DAX, CAC 40, FTSE 100) or sectors (e.g. EURO STOXX® Banks, STOXX® Europe 600 Basic Resources, STOXX® Europe 600 Health Care).

Intrinsic value: In the case of a call warrant, the intrinsic value is the difference between the current price of the underlying and the strike price, which can only be positive. Equivalently, the intrinsic value of a put warrant is the difference between the strike price and the current price of the underlying.

ISIN: The ISIN is the International Securities Identification Number with which all securities can be clearly identified.

Issuer risk: Risk of certificate investors that Raiffeisen Centrobank AG cannot fulfill its obligations arising from the certificates - e.g. in case of insolvency/insolvency/overindebtedness. In such cases, there may be a total loss of the capital invested.

Issue value date: The issue value date is the date from which a certificate can be traded on the secondary market. This usually corresponds to the day after the first valuation date.

J

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K

Key Information Document: The Key Information Document provides essential information about an investment product. This information is required by law to help understand the nature, risk, costs and potential gains and losses of that product and to make it comparable with other products.

Knock-out: Knock-out in the case of a turbo certificate means that the certificate expires. If the price of the underlying touches the barrier (knock-out threshold), the product is stopped out and redeemed at the residual value.  The knock-out threshold and the strike price of the turbo certificate are adjusted daily to take into account the financing costs.

L

Leverage: The leverage factor indicates the extent to which the price of a certificate reacts to a change in the price of the underlying asset. In the case of turbo certificates, for example, the leverage indicates the percentage by which the price of the certificate rises or falls if the price of the underlying asset rises or falls by one percent.

Leverage factor: The leverage factor is a constant key figure and indicates the ratio in which the investor participates in the price development of the underlying.

Leverage product: Leverage products allow risk-averse investors to participate disproportionately in rising (long) or falling (short) prices of an underlying even with a small capital investment. Leverage products are particularly suitable for investors who want to realize a short-term market expectation. However, if the investor's market expectation does not materialize, the capital invested may be lost completely.

M

Market capitalization: The market capitalization is the arithmetical total value of the shares of a listed company.
Calculation:
Market capitalization = number of shares outstanding x share price

Maturity: The maturity of a certificate is determined at issuance. The following is a brief overview of the most common investment product maturities:

Capital protection or guarantee certificates: 5-8 years
Bonus certificates: 3-5 years
Reverse convertibles: 1-2 years
Express certificates: 1-5 years (annual redemption option)

Market risk: Although certificates can optimize the risk-reward ratio, they cannot completely eliminate the market risk for investors. The price of a certificate is determined both by the performance of the underlying asset and by volatility and interest rate levels. This is the market risk to which the investor is exposed.

Maximum amount: Depending on the product design, a maximum payout amount may be set for certificates. The maximum amount represents that upper price limit up to which the investor can participate at most in the price performance of the underlying.
Other terms: Maximum amount, upper yield limit, cap

Moneyness: For warrants, moneyness is the ratio between the current price of the underlying and the strike price. In the case of calls, the price of the underlying is divided by the strike price, while in the case of puts, the strike price is divided by the price of the underlying. If the moneyness is greater than 1, the warrant is "in the money". If it is lower, the warrant is "out of the money". With a moneyness of 1, warrants are exactly "at the money".

Multi reverse convertible with barrier: A multi reverse convertible with barrier is a reverse convertible with a barrier that refers to a basket of shares (consisting of two or more shares) as the underlying.

N

Nominal amount (face value): The nominal amount corresponds to the denomination - and thus also the minimum investment amount - of the certificate. In most cases, this amounts to EUR 1,000 for Raiffeisen Centrobank certificates.

O

Omega: For warrants, the key figure omega is also referred to as the so-called effective leverage. The omega indicates the percentage by which the price of a warrant changes if the price of the underlying changes by one percent. It is calculated from the product of the two key figures delta and leverage (omega = delta x leverage). For example, a warrant with a leverage of 10 and a delta of 0.5 has an omega of 5. The price of this warrant would therefore move by around 5 percent if the underlying moved by 1 percent.

Open-end: Certificates without a maturity limit are known as open-end certificates.

P

Participation: The participation factor indicates the ratio in which investors participate in the performance of the underlying at maturity. A disproportionate participation of more than 100% is also possible.

Payout level: The payout level is the price threshold that is decisive for triggering an (early) redemption.

Payout price: The payout price stands for the early fixed amount at which an express certificate is redeemed on the respective (early) redemption date.

Physical delivery: In the case of physical delivery, shares of the underlying are booked into the investor's securities account at the number defined at the beginning of the term (nominal amount/starting value) - investors thus become shareholders of the underlying share. Express certificates and reverse convertibles usually feature physical delivery.

Premium: The premium on a warrant indicates how much more expensive it is to acquire (call) or sell (put) the underlying asset by purchasing a warrant and then exercising the option right. Similarly, the premium on a bonus certificate indicates how much more expensive the certificate is compared to its underlying. The higher the premium, the higher the risk of loss if the barrier is touched/undershot.

Primary market: During the subscription period, certificates can be purchased at the issue price on the primary market. The issue price remains constant throughout the subscription period. Typically, the subscription period is approximately 4 weeks.

Protection level: The protection level is the price threshold of the underlying asset at which the calculation of the certificate is stopped and a new trading day is simulated. The protection level serves as a reference price for the recalculation of the factor level.

Put: A "put" is a warrant that theoretically gives the investor the right to sell the underlying security  - taking into account the subscription ratio - at a predetermined price at a certain point in time (European exercise) or during a certain period (American exercise). See also call.

Q

Quanto: The addition "quanto" means that a certificate is currency hedged. This eliminates the currency risk and the absolute performance of the underlying is decisive for the performance of the certificate.

R

Reverse convertible: Reverse convertibles and reverse convertibles with barrier refer to an individual share or a basket of shares as the underlying and carry an interest rate above the market level. The interest amount is always paid out at a fixed rate, irrespective of the performance of the underlying. Whether 100% of the nominal amount is repaid at maturity or redeemed in the form of physical delivery of shares depends on the performance of the underlying share(s). For more information, please see our product category brochure. Download PDF now.

Rho: Ratio indicating by how much the price of the warrant changes if the interest rate level rises by 1%.

Repayment: Many certificates have a predefined term and therefore a fixed repayment date. At this date, the certificate is redeemed.

S

Secondary market: After the subscription period, certificates are listed on the secondary market (= stock exchange) during their term and can thus be traded at any time.

Small caps: Small caps are shares with a low market capitalization in a sector or country comparison.

Spread: The percentage difference between the selling and buying price (bid/ask spread) of a security.

Start value: The start value represents the price level from which further price thresholds are calculated at the start of the certificate's term. Classically, it corresponds to the closing price of the underlying on the first valuation date. It can be expressed either as a percentage, equal to 100%, or as an absolute value.

Stock exchange listing: The stock exchange listing indicates on which stock exchanges a certificate can be traded. Certificates of Raiffeisen Centrobank AG are usually listed on the stock exchanges of Vienna, Frankfurt and Stuttgart.

Structured products: Structured products are financial products that are based on one or more underlying assets. The payoff profile is typically mapped in the background by combining option and bond components. Certificates count as structured products.

Subscription period: During the subscription period certificates can be subscribed (bought) at a constant price. The subscription period is usually 4 weeks and is called primary market.

Subscription ratio: The subscription ratio indicates how many units of the underlying a certificate relates to. A subscription ratio of 0.01 or 1:100 means that 100 certificates are needed to cover one unit of the underlying.

T

Term: The term indicates the period during which the certificate can be traded, i.e. bought and sold. The term of a certificate is determined prior to issue.

Threshold: The threshold defines the maximum daily percentage price movement of the underlying, above which the leverage is reset to the leverage factor during the day. This prevents a knock-out and minimizes the probability of an immediate total loss of the capital invested.

Theta: Indicator describing the loss in time value of a warrant within one day.

Time value: The time value is that part of the warrant price which is not covered by the intrinsic value. Towards the end of the term, the time value tends towards zero. The price of the warrant and the intrinsic value continue to approach each other.

Turbo certificate: Turbo certificates enable investors to participate in the performance of an underlying on a leveraged basis. Unlike factor certificates, the leverage is not constant, but changes constantly. In addition, turbo certificates have a knock-out threshold at which the calculation is stopped and the product is redeemed at the residual value. Unlike warrants, the volatility of the underlying asset has no influence on the pricing of the certificate. Download PDF now. 

U

Underlying: The underlying is the reference value that determines the performance of the certificate. In principle, all liquid instruments traded on a regulated market (= stock exchange) can serve as underlyings of certificates - these include, in particular, shares, indices and futures contracts on commodities or indices.

V

Valuation days: In the case of express certificates, there are periodic valuation days during the term which are relevant for the (early) redemption. On each of these valuation days, the closing price of the underlying is compared with the payout level

Value date: The value date is the date on which the investor's account is debited for the purchase or credited for the sale or redemption of a security. This usually corresponds to the trade date + 2 days.

Vega: Key figure indicating by how much the price of the warrant changes if the volatility of the underlying increases by 1%.

Volatility: Volatility is a measure of risk and measures the intensity of fluctuation in the price of an underlying within a given period. The higher the volatility, the more volatile the underlying is.

W

Warrant: Warrants enable risk-averse investors to profit disproportionately from rising ("call") or falling ("put") prices of an underlying with only a small capital investment. Download PDF now.

Winner: In the case of growth-oriented capital protection certificates (so-called "winners"), investors participate directly in the positive (average) price performance of the underlying in accordance with the participation factor.

WKN: The WKN (Wertpapierkennnummer) is the German equivalent of the ISIN. The 6-digit combination of numbers and letters enables securities to be clearly identified.

Worst-of: In the case of certificates with multiple underlyings, redemption at maturity is made according to the underlying that shows the worst performance over the term.

X

Xetra: Xetra (exchange electronic trading) is the fully electronic trading system of Deutsche Börse Frankfurt. In terms of trading volume, Xetra is considered the most important exchange trading venue in Germany.

Y

Year-to-date (YTD): Year-to-date refers to the period from the beginning of the year to the current day. In the financial industry, YTD performances are often considered.

Z

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