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13.40% p.a. Multi Barrier Reverse Convertible (Callable)

Worst-of Alcon · Kühne + Nagel · Logitech — ISIN CH1607594129 — CHF

Headline Simulation Results

+7.69%
Expected Annualized Return
19.69%
Probability of a Negative Return
−25.44%
99% Confidence VaR (1-Year)
Metric Value
Expected annualized return +7.69%
Probability of a negative return 19.69%
99% confidence VaR (1-year) −25.44%
Expected total return over the (variable) holding period +8.56%
Expected holding period ≈ 15.9 months (1.33 years)
Best possible annualized return (coupon cap) ≈ +13.40%
Based on 10,000 Monte-Carlo simulations over the product's 21-month maximum life, the note is expected to return about 7.7% per year while carrying a ~20% chance of a loss. The distribution is strongly asymmetric: about 36% of paths finish with full capital back plus all seven coupons (a total gain of +23.45%), roughly 58% of paths run the full 21 months, while about 21% suffer a barrier loss, producing a fat left tail (the worst 1% of outcomes) that returns below −40% on a total-return basis.

Basic Product Information

What it is. A yield-enhancement note (Swiss SSPA type 1230) issued by Leonteq Securities AG, quoted in CHF with a CHF 1,000 denomination. It pays a fixed coupon of 13.40% p.a., distributed quarterly (CHF 33.50 per CHF 1,000 = 3.35 index points per quarter, 7 coupons in total if held to the final date).

How it works — plain language
  1. You get paid the coupon no matter what — the quarterly coupon is paid "in any case" for as long as the note is alive, even if the shares fall.
  2. You only lose capital if the shares fall a long way. Each of the three shares has a barrier at 59% of its starting level, monitored continuously during the whole term (~21 months).
    • If no share ever trades at or below 59% → you get your full capital (100) back at maturity, plus all coupons.
    • If the barrier is breached and the worst-performing share finishes below its starting level → you receive that worst share (physically) instead of cash, i.e. you bear the full downside of the weakest name.
    • If the barrier is breached but the worst share still finishes at or above its starting level → you get your full capital back.
  3. The issuer may call the note early. On any of five quarterly observation dates the issuer can redeem at par plus the coupon due — after which no further coupons are paid.

Key structural facts. Worst-of basket (downside driven by the weakest of Alcon, Kühne + Nagel and Logitech); barrier 59% (continuous); strike 100%; upside is capped (no equity participation); issuer-callable; single currency CHF (no FX/quanto); issuer credit exposure to Leonteq (Fitch BBB−).

Key Statistics — Structured Product vs Underlying

Benchmark = equally-weighted basket of the three shares (the same three names, no worst-of). Underlying figures are total returns (dividends added).

Metric Structured Product Underlying (Basket + Div) Underlying (Price only)
Expected annualized return +7.69% +12.96% +11.39%
Expected annualized volatility 11.08% 19.89% 19.89%
Probability of loss 19.69% 28.30% 31.58%
99% VaR (1-year) −25.44% −20.84% −22.41%
The note delivers a materially smoother ride than simply holding the basket: roughly half the volatility and fewer losing outcomes. In exchange, the expected return is lower than the basket's, because the coupon caps the upside while the worst-of barrier exposes the investor to the weakest name in a sharp sell-off. The note earns a positive risk-adjusted return (return/volatility ≈ 0.69), marginally ahead of the underlying basket (≈ 0.65).

Simulation Charts

Outcome scatter — product vs underlying

The horizontal "shelf" at +10% / +23.45% shows the capped upside (coupons dominate). Points dropping steeply below the 1:1 line are barrier-breach paths where the investor absorbs the worst-of downside.

Simulation outcomes — product vs underlying
Annualized-return histograms

Colours indicate how long the note was held. The product's return concentrates in a narrow positive band (coupon-driven) with a thin left tail; the underlying's distribution is far wider and heavier-tailed. Note that ~21% of paths are redeemed after only 6 months, so their annualized figures are amplified by the linear-annualization for sub-12-month holding periods — these should be read together with the (small) total return and short holding period.

Product annualized-return histogram Underlying annualized-return histogram
Risk / return map

The note sits materially to the left (lower volatility) of the underlying basket and well above the risk-free rate.

Risk / return map
Return distribution box plot
Return distribution box plot
Scenario probabilities
Scenario probabilities
Holding-period and coupon-count distributions
Years held distribution Coupon-count distribution

The note is called early in ~42% of paths (most often at the first observation date, 21.3% of all paths) and runs the full 21 months in ~58% of paths. The coupon-count distribution mirrors this.

Investment Commentary

Strengths
  • High headline coupon of 13.40% p.a. paid quarterly regardless of the shares' path.
  • Comfortable conditional protection: the 59% barrier leaves a 41% buffer before any capital is at risk, and about 80% of simulated paths finish with a positive return and ~80% beat the risk-free rate.
  • Much lower risk than the underlying: expected volatility of ~11% vs ~20% for the basket, and fewer losing outcomes (19.7% vs 28.3%).
  • Positive expected return with the strongest median outcome (a +10.05% total return is the mid-point of simulated results).
Risks to be aware of
  • Upside is fully capped at the coupon — the investor gives up all equity upside above ~13.4% p.a.
  • Worst-of exposure: the downside is driven by the weakest of three shares, so a single bad name can trigger losses; the barrier is more easily breached than for a single-name note.
  • Issuer call truncates the coupon stream — early redemption in ~42% of paths limits realised income and shortens the average holding period to ~1.3 years (vs the 2-year maximum).
  • Fat left tail: the worst 1% of scenarios lose more than ~40%, and the 99% VaR (−25.4%) is worse than the underlying basket's (−20.8%) because a single breached barrier forces the investor to buy the worst performer at par.
  • Issuer credit risk (Leonteq, BBB−).

Figures are simulated, not guarantees. This analysis is for information only and is not investment advice.