8.00% p.a. Multi Barrier Reverse Convertible (Callable) on Avolta, Richemont & Flughafen Zürich

The product behaves like a high-coupon bond with a conditional capital-protection feature. In ~83% of simulated paths the total return is non-negative (the investor is repaid principal plus coupons and earns a smooth ~7.8%–8.0% annualized return); essentially all of the risk is concentrated in the ~17% of paths where a deep drawdown triggers the barrier and the redemption is delivered in the worst-performing stock.

How it works (in plain terms)

• You receive 8% p.a. in cash coupons no matter what the stocks do — the coupons are paid unconditionally.
• At maturity you get your full 100% back unless one of the three stocks has, at any moment, traded at or below 55% of its starting level (a "barrier event").
• If no stock ever breaches 55% → you get par (100%) plus all coupons.
• If a stock does breach 55% and the worst-performing stock finishes below its start → you instead receive that worst stock (or its cash value at its final price), so you share the downside of the weakest name.
• If a stock breaches 55% but the worst stock still finishes at or above its start → you still get par.
• The issuer may call the note early on any quarterly observation date; if called you receive par plus the coupon, and the product ends.

Reading the benchmark columns. Because the note is called early when the market is strong, the underlying basket's return measured over the note's same realized holding period is upward-biased (short, market-up windows annualized linearly), which is why its annualized figure (14.39%) exceeds the 21-month buy-and-hold figure (4.64%). The 21-month buy-and-hold column is the cleaner "hold the basket instead" comparison: over the note's full life the basket is expected to earn ~4.6% annualized (~7.6% with dividends), with ~41% chance of a loss and ~17% volatility.

About 29% of paths are called at the first opportunity (0.5 yr) and 49% run full term (1.75 yr); the remainder are spread across the intermediate call dates.

Potential merits

• High, unconditional coupon of 8% p.a. in a CHF environment where the risk-free rate is ~0%. Coupons are paid even if the stocks fall, as long as the note is alive.
• Meaningful downside buffer: a position only suffers a capital loss if a stock first falls ≥45% (55% barrier) and the worst stock finishes below its start. This combination is uncommon, giving a loss probability of ~17% versus ~41% for holding the basket outright.
• Lower volatility than the underlying basket (~11% vs ~17% annualized) and a ~83% probability of beating cash.
• Contingent protection — many "worst-of" trauma scenarios (barrier touched but worst name recovers to ≥ its start) still redeem at par.

Points to weigh

• Upside is fully capped at par — there is no participation in the equity upside; strong rallies only get you called and returned to par.
• Worst-of exposure to three names: Avolta is the most volatile of the three (~44% annualized), so it dominates the barrier-risk profile.
• The expected return is below the basket's expected return — over the note's life the equal-weight basket is expected to out-earn the coupon, so the note is effectively a "sell volatility / cap upside" position.
• Continuous barrier: the 55% level is monitored at any time, which is materially harder to avoid than a fixing-date-only barrier.
• Early call works against the holder in strong markets — early redemption returns par plus fewer coupons, truncating the coupon stream and the total return.
• Credit risk sits with the issuer (Leonteq) and guarantor (Aargauische Kantonalbank).