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structured note

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Financial Dictionary

Structured Note

1. A synthetic medium-term debt obligation with embedded components and characteristics that adjust the risk/return profile of the security.

2. An instrument whose value is determined by the price movement of the asset underlying the note. It allows investors to realize a profit from favorable price movements.

Investopedia Commentary

A structured note is a hybrid security that attempts to change its profile by including additional modifying structures. A simple example would be a 5 year bond tied together with an option contract for increasing the returns.

See also: Bond, Hybrid Security, Medium Term, Synthetic

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Financial Dictionary

structured note

A medium-term derivative debt security that has one or more special features such as an interest payment based on an equity index, a foreign exchange index, or a benchmark interest rate. Issuers of structured notes often hedge these securities with their own transactions in the derivatives market. Structured notes tend to be complex and are aimed primarily at sophisticated investors.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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