# Glossary - P

This section provides an explanation for some of the jargon used to describe structured retail products. If you would like us to add additional words then please let us know by __clicking here__.

#### Participation

Many structured products provide a minimum fixed return plus an additional return calculated by multiplying any rise in the underlying index by a fixed percentage. This percentage is often called the participation or participation rate.

For example, a typical product would offer a minimum 100% return of capital at the end of the investment term, plus 80% of any rise in the FTSE100 index. So if the index rose by 40% over the period then the investor would receive back his initial capital in full plus an additional return of 32% (i.e. 80% of 40%). The participation in this example would be 80%.

#### Payoff

This is a general term often used to describe the return that is provided by a structured product or an option. So for example, one could say that the payoff of a product is equal to 100% plus 80% of the rise in the underlying index.

#### PEP (Personal Equity Plan)

This is a tax efficient savings product launched by the UK government in 1987. All qualifying investments held in the plan were free of income and capital gains tax but there was a limit on the amount that could be invested each year.

PEPs were replaced by ISAs in 1999 and existing PEP investments can be switched into new ISAs.

#### Podium

A return based on a series of coupons. The value of each coupon is determined by the number of assets (usually stocks) which meet certain performance criteria. The coupons are rolled up and paid out at maturity.

#### Polizza di assicurazione

A mortgage-wrapped product where repayments vary according to the performance of the underlying.

#### Power Option

A return based on a variable participation in the rise or fall of an underlying, where the participation rate increases alongside the rise or fall in the underlying. Examples of such products include Asian Call Squared products

#### Power Reverse Dual Currency

A dual currency product for which the return at maturity is either in the original currency or an alternate currency at a rate of exchange fixed upfront and at the choice of the product provider. In addition, the product offers an initial fixed coupon, followed by variable coupons linked to FX rate movements during the investment period. This product is usually associated with a callable or knock-out feature.

#### PPN

A Principal Protected Note is a fixed income security that guarantees a minimum return equal to an investors initial investment (the principal amount).

#### Precipice Bond

A precipice bond is a name that has been given to various types of high income product. Originally the name was given to products offered in the UK in the mid-1990s that offered a high fixed income but in which a small fall in the underlying index would result in a large loss of capital.

More recently the same name has been given to Reverse Convertible products.

#### Preference Shares

Preference Shares are a special class of share which pay a fixed rate of interest. They are generally regarded as slightly lower risk than ordinary shares.

#### Private Bank or Wealth Manager

A financial institution that focuses on private banking and high-net-worth clients.

#### Profiled

A return based on the performance of different baskets, each linked to the same underlyings but in varying weights within each basket

#### Protected Tracker

A protected tracker is a type of structured product that provides a degree of capital protection together with participation in any rise in the underlying index.

There are many variations but typically the product might offer a return equal to 200% of any rise in the FTSE100 and full capital protection unless the index falls by more that 50% during the investment term and fails to recover by maturity. If this did occur then the capital return would be reduced on a 1:1 basis for the fall in the FTSE100 index.

See also Airbag, Super Tracker and Tracker products.

#### Protection Level

The protection level is the level of the underlying index that, once breached, could result in a loss of capital. See hard protection and soft protection.

#### Put option

A put option is a type of derivative that gives the holder the right, but not obligation, to sell a set quantity of the underlying asset at a given price (the strike price) on or before a specified date (sometimes called the exercise date). Put options therefore benefit the owner if the price of the underlying falls.

If the underlying of the option is an index then typically the option will cash settle. This means that the seller will make a cash payment to the buyer equal to the difference between the final price of the index and the strike price multiplied by the notional size of the option.

So for example, the buyer of a put option on the FTSE100 index with a strike price of 4000 would receive a payment from the seller if the final index level was lower than 4000 on the maturity of the option. If the notional size of the option was £10m then if the final index level was 3200 i.e. a 20% fall, then the seller would pay the buyer £10m x 20% = £2m. If the index was higher than 400 at maturity then no payment would be made.