SYSTEMS AND METHODS FOR PROVIDING EMBEDDED RECEIVER NOTES
Systems and methods are provided for providing an embedded receiver note which includes a swaption embedded in a bond. If a reference rate exceeds a strike rate of the swaption, a note holder receives a par value of the note. If the reference rate is lower than the strike rate of the swaption, the note is extended with an exercised swaption.
1 . A method comprising:
issuing a note to a noteholder, wherein the note comprises a swaption embedded in a bond;
receiving a payment in return for the note; and
at maturity of the note,
paying a par value of the note to the noteholder, if a reference rate exceeds a strike rate of the swaption; or
extending the note with an exercised swaption, if the reference rate is lower than the strike rate of the swaption.
2 . The method of claim 1 wherein the swaption comprises a receiver swaption.
3 . The method of claim 1 wherein the bond comprises a zero coupon bond.
4 . The method of claim 1 wherein the reference rate comprises a swap rate.
5 . The method of claim 1 wherein the note further comprises a credit risk substantially corresponding to a credit risk of an issuer of the bond.
6 . A method comprising:
receiving in return for a payment, a note comprising a swaption embedded in a bond;
at maturity of the note,
receiving a par value of the note, if a reference rate exceeds a strike rate of the swaption; or
exercising the swaption to extend the note, if the reference rate is lower than the strike rate of the swaption.
7 . The method of claim 6 wherein the swaption comprises a receiver swaption.
8 . The method of claim 6 wherein the bond comprises a zero coupon bond.
9 . The method of claim 6 wherein the reference rate comprises a swap rate.
10 . The method of claim 6 wherein the note further comprises a credit risk substantially corresponding to a credit risk of an issuer of the bond.
11 . A note comprising:
a swaption embedded in a bond;
a maturity date equal to a maturity date of the bond; and
a right to receive par value of the bond at maturity if a reference rate exceeds a strike rate of the swaption, or
a right to exercise the swaption if the reference rate is less than the strike rate of the swaption.
12 . The note of claim 11 wherein the swaption comprises a receiver swaption.
13 . The note of claim 11 wherein the bond comprises a zero coupon bond.
14 . The note of claim 11 wherein the reference rate comprises a swap rate.
15 . The note of claim 11 wherein the note further comprises a credit risk substantially corresponding to a credit risk of an issuer of the bond.