Stock-Linked Notes

Stock-linked notes are a special type of bonds that offer fixed interest payments and simultaneously have the potential to benefit from the performance of an underlying stock price. This form of investment combines elements of fixed-income securities and equity investments. In this article, we will take a closer look at the Aktienanleihe auf Porsche issued on 11/5/2023 with a term of 136 days. We will also consider the underlying stock, Dr. Ing. h.c. F. Porsche (DE000PAG9113).

What are Stock-Linked Notes?

Stock-linked notes are structured financial products that offer investors regular interest payments and repay at the end of the term either the nominal amount in cash or a specific number of shares of the underlying company. Repayment in shares typically occurs if the stock price on the valuation date is below a certain level.

How Aktienanleihe auf Porsche Works

The Aktienanleihe auf Porsche was issued on 11/5/2023 with a term of 136 days. This stock-linked note is tied to the performance of the stock Dr. Ing. h.c. F. Porsche (DE000PAG9113). During the term, investors receive a fixed interest payment, regardless of how the stock price develops. At the end of the term, the nominal amount is either paid back in cash or in shares of the underlying company, depending on the stock price on the valuation day.

Advantages of Stock-Linked Notes

Fixed Interest Payments: Stock-linked notes offer regular interest payments, which can be a stable source of income for investors.

Yield Opportunity: Investors can benefit from the performance of the underlying stock, especially if the price on the valuation day is above the initial level.

Risk Mitigation: Stock-linked notes offer some degree of risk reduction compared to direct stock investments, as they guarantee fixed interest payments.

Risks and Considerations

Despite the attractive features of stock-linked notes, investors should also consider the associated risks and considerations:

Stock Price Risk: If the price of the underlying stock on the valuation day is below a specific level, the investor receives shares instead of the nominal amount, which can lead to losses.

Issuer Risk: The risk of the bond issuer becoming insolvent cannot be excluded. Investors should therefore carefully assess the issuer's creditworthiness.

Limited Price Gains: Compared to a direct investment in stocks, the potential for price gains in stock-linked notes is limited.