BNP Markets Novel Snowball Variation

BNP Paribas in London is marketing an innovative interest rate-linked investment product for clients who believe rates will rise.

  • 22 Oct 2004
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BNP Paribas in London is marketing an innovative interest rate-linked investment product for clients who believe rates will rise. The structure is similar to a snowball note because each coupon is linked to the value of previous coupons. A typical snowball product, however, pays out as rates fall, whereas the BNP Coral note will pay out if rates rise. The note also has a callable feature, which enables BNP to offer a high initial fixed coupon to the investor.

In an example of the structure, linked to three-month Euribor, the investor will receive a coupon for each fix the index is at or above the margins, after receiving a guaranteed 7.5% for the first two periods. Kara Lemont, a marketer at BNP in London, said, "The curve is steep for a reason, there are some people out there who think that rates will go up." This product offers these investors the chance to express that view, added Lemont.

  • 22 Oct 2004

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5 SG Corporate & Investment Banking 24,398.89 138 4.55%

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