11.40% p.a. Multi Barrier Reverse Convertible
Headline Simulation Results
| Metric | Structured Product | Underlying Basket (with dividends) |
|---|---|---|
| Expected Annualized Return | 7.63% | 8.83% |
| Expected Annualized Volatility | 10.31% | 18.59% |
| Probability of Loss | 10.64% | 33.00% |
| 99% VaR (1-year) | -31.10% | -29.90% |
| Expected Total Return (18 months) | 12.07% | 14.77% |
The structured product offers a significantly lower probability of loss (10.64%) compared to a direct investment in the underlying basket (33.00%), while also exhibiting lower volatility (10.31% vs 18.59%). However, the expected annualized return is slightly lower due to the capped upside nature of the product.
Product Overview
11.40% p.a.
Coupon Rate (paid quarterly)
55%
Barrier Protection Level (continuous observation)
18 months
Product Term (July 2026 – February 2028)
EUR 28.50
Quarterly Coupon per EUR 1,000 Denomination
Basic Information
| Product | 11.40% p.a. Multi Barrier Reverse Convertible |
|---|---|
| Underlyings | BASF SE, Schneider Electric SE, Siemens AG (worst-of basket) |
| Currency | EUR |
| Term | 18 months (July 2026 – February 2028) |
| Coupon | 11.40% p.a., paid quarterly (EUR 28.50 per EUR 1,000 denomination) |
| Barrier | 55% of initial level (continuous observation) |
| Issuer Callable | Yes, quarterly starting February 2027 |
How It Works
This is a reverse convertible structure that pays a high fixed coupon (11.40% p.a.) regardless of underlying performance, as long as the product is outstanding. The capital protection is conditional:
- Coupons: Fixed quarterly coupon of EUR 28.50 per product (2.85% per coupon) paid on scheduled dates, regardless of underlying performance.
- Barrier Protection (55%): If no underlying falls below 55% of its initial level during the entire observation period, the investor receives 100% of their capital back at maturity.
- If Barrier is Breached: The capital protection is lost. At maturity, if the worst-performing underlying is below its initial level (strike = 100%), the investor receives shares of that worst-performing underlying equivalent to its depreciated value. If all underlyings are above initial level despite the barrier breach, capital is still returned in full.
- Issuer Call: The issuer (Basler Kantonalbank) has the right to call the product early on quarterly observation dates, returning the denomination plus the coupon for that period.
Key Statistics
89.33%
Probability of Outperforming Risk-Free Rate (2.17%)
10.71%
Barrier Event Probability
18 months
Expected Holding Period
| Metric | Structured Product | Underlying Basket (w/ div) |
|---|---|---|
| Expected Annualized Return | 7.63% | 8.83% |
| Expected Annualized Volatility | 10.31% | 18.59% |
| Probability of Loss | 10.64% | 33.00% |
| 99% VaR (1-year) | -31.10% | -29.90% |
| Expected Holding Period | 18 months | 18 months |
| Barrier Event Probability | 10.71% | — |
| Probability of Outperforming Risk-Free Rate (2.17%) | 89.33% | — |
Charts
Scatter Plot: Structured Product vs Underlying Basket Returns
Each point represents one simulated outcome. The red dashed line is the 1:1 line. Points above the line indicate the structured product outperformed the underlying basket.
Underlying Basket Annualized Return Distribution
Structured Product Annualized Return Distribution
The product histogram shows a concentration of outcomes around 11.3% annualized return (the maximum achievable return from coupons), with a left tail representing barrier breach scenarios.
Scenario Probabilities
Risk vs Return Comparison
Annualized Return Distribution Comparison (Box Plot)
Holding Period Distribution
Number of Coupons Received
Investment Commentary
Key Strengths
- High coupon yield: 11.40% p.a. quarterly coupons provide attractive regular income.
- Significant downside protection: Barrier at 55% provides a substantial cushion before capital is at risk (only 10.71% probability of barrier breach based on simulations).
- Lower volatility: The structured product exhibits approximately half the annualized volatility of the underlying basket (10.31% vs 18.59%).
- Low probability of loss: Only 10.64% probability of negative annualized returns, compared to 33.00% for the underlying basket.
- 89.33% probability of outperforming the risk-free rate (2.17%).
Considerations
- Capped upside: Returns are capped at the coupon rate; the product does not participate in any upside beyond the fixed coupons.
- Barrier breach risk: If any underlying falls below 55% of its initial level, capital becomes at risk, and losses could be significant (VaR of -31.10%).
- Issuer call risk: The issuer can call the product early, potentially shortening the income stream if they choose to redeem.
- Credit risk: As a debt instrument, investors are exposed to the credit risk of Basler Kantonalbank (rated S&P AA+ / Fitch AAA).
- Worst-of structure: The payoff depends on the worst-performing underlying, increasing the probability of barrier breach compared to a single-name reverse convertible.