Principal-Protected Note

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Principal-Protected Note

A security in which the original investment is put at no or very little risk. An example is a bond, in which the bondholder is guaranteed (short of default) to receive at least the amount he/she originally invested. The main risk to the bondholder is that the bond issuer will not pay coupons (or interest) on time. Principle-protected notes tend to have small, fixed returns. See also: Fixed-income security, principal.
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Such transactions may be structured for any number of reasons--for example, for principal protection, tax minimization, accounting cosmetics, monetization, or other specific purposes." (5) Some of the more popular types of structured products sold to retail investors include principal-protected notes, equity-linked notes, and indexed-linked notes.
The Global Exceed strategy can be accessed by institutional investors, pensions funds, asset managers, private banks, insurance companies and other fund managers via a wide range of formats, including excess return swaps, cash-plus floaters, funds, OTC options, principal-protected notes (including CPPI), and liability-side swaps allowing for structured funding cost reduction.
Last week, a friend from the media industry called me and said he lost half a million dollars in a bad investment he made in principal-protected notes issued by the collapsed investment bank Lehman Brothers.

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