Libor-Linked Deep Barriers
Libor Linked Deep Barrier reverse convertibles are similar to classic barrier reverse convertibles. In July 2010, investment banks suddenly started to issue these products with a coupon linked to the LIBOR rate (London Inter Bank Offer Rate, the short-term interest rate) and with barriers often set at or below 50% of the current spot price of the underlying index or stock. The maturity was often longer than usual, reaching three or four years. Example: Type: Libor Linked Deep Barrier Reverse Convertible Coupon (p.a.): CHF -Libor + 3.7% In a way, these products may induce the investor to