Glossary - K
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.
A kicker is a term sometimes used to describe an additional bonus payment that is received at maturity of a structured product if the underlying rises by a significant amount.
For example, a growth product might offer a kicker equal to an extra 10% return payable if the underlying doubles over the term of the investment.
A return linked to the performance of a basket (usually a share basket) from which the lowest performing assets as well as the best performing assets have been progressively eliminated, or ignored from subsequent calculations, during the investment period.
A knockout call type product is a structured product which matures early if the underlying has risen to a specified level on a fixed date during the term.
For example, a growth product might offer a minimum return of 100% plus 100% of the rise in the FTSE100 index after six years but pay out 130% after three years if the index has risen by 30% or more at this date.
Knockout / Knockin
A knockout or knockin feature is a characteristic of a structured product whereby the return is dependant on the underlying reaching, or not reaching, a pre-specified level at some time during the term of the investment.
An example would be a Reverse Convertible where the risk to capital only arises if the underlying falls by a fixed amount at some time during the term of the investment. This level is called the barrier level and if the underlying reaches this level then the derivative or option that is used to create the product is said to have knocked-in.
The date at which the knockout feature could be activated, provided the knockout level is reached.
The level, expressed as a percentage above the strike level, which the underlying needs to reach at the knockout date in order to activate the knockout feature.
This is the amount received by the investor shortly after the knockout date, expressed as a percentage of the capital invested, if the knockout feature has been activated.