Reverse Convertibles

Payoff of Reverse Convertibles

Product description & Functionality

Reverse Convertible (RC) is based on one or more underlying assets and pays a guaranteed coupon. If the closing price of the underlying asset is above the strike price at maturity, the nominal value will be repaid in full. Otherwise, the lowest performing underlying asset will be delivered at a cost corresponding to the strike price. In this case, this leads to a significant discount compared to the starting level.


  • If the underlying asset closes below the strike price at maturity, the underlying asset or cash settlement will be offered.
  • If the underlying asset exceeds the strike at maturity, the nominal will be repaid.
  • Coupons are guaranteed and paid regardless of the underlying performance
  • Low risk of loss compared to underlying direct investment
  • Some underlying assets (“worst”) allow higher coupons or lower strikes, but are associated with higher risk
  • Maximum return is limited (cap)

Softcal vs Autocall

Softcall. If a Reverse Convertible comes with a Softcall function, the issuer of the product is able to, but does not have to, repay the nominal value (in full), plus a pro-rata coupon, on predetermined observation dates.

Autocall. If a Reverse Convertible comes with an Autocall function, the issuer of the product is obliged to repay the nominal value (in full), including a pro-rata coupon, provided that all the underlyings close above the predefined Autocall trigger.

Marrket Expectations

  • Underlying trending sideways or slightly rising
  • Decreasing volatility
  • Closing price above the strike

Advantages and Risks


  • The guaranteed coupon is paid out independently of the performance of the underlyings
  • No barrier
  • Monitoring only at maturity
  • Limited capital protection up to the strike


  • Issuer exposure risk
  • No guaranteed capital protection
  • The maximum yield is limited to the coupon and no dividends are paid out