RCB reverse convertible offers safety at a cost

Raiffeisen Centrobank issued this reverse convertible based on the Euro Stoxx 50 index to investors in Germany in 2011. The product lived up to its promises but it still underperformed a direct investment in Europe’s benchmark equity index


Raiffeisen Centrobank issued a three-year reverse convertible product for German investors in 2011 linked to the Euro Stoxx 50 index. Investors were to receive a fixed annual coupon of 5% with the repayment of capital dependent on the performance of the index.

The barrier level was 41%, which, is relatively low compared to the vast majority of structured products in the UK and the US. The barrier is American, which is measured daily and was the most common barrier type at the time of launch. If

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