What is reverse convertible bond in SAP IS-B - SAP for Banking?

SAP Term: reverse convertible bond

• Component: IS-B

• Component Name: SAP for Banking

• Description: Bank Components Bond where the issuer and only the issuer can choose whether to repay the nominal amount when due or to provide a previously defined number of a certain share.

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• Key Concepts: 
  A reverse convertible bond is a type of structured product that combines a bond with an option. It is a debt security issued by a company that pays a fixed coupon rate and matures at a predetermined date. The bond also has an embedded option that allows the issuer to redeem the bond at a predetermined price before the maturity date. 
  
  How to use it: 
  Reverse convertible bonds are used by companies to raise capital and by investors to gain exposure to the underlying asset. The issuer of the bond can use the proceeds from the sale of the bond to finance its operations or investments. Investors can use reverse convertible bonds to gain exposure to the underlying asset without taking on the risk of owning the asset directly. 
  
  Tips & Tricks: 
  When investing in reverse convertible bonds, investors should be aware of the risks associated with them. These include the risk of default, liquidity risk, and market risk. Investors should also be aware of any fees or commissions associated with investing in these bonds. 
  
  Related Information: 
  Reverse convertible bonds are available in SAP for Banking (IS-B). This module provides tools for managing and analyzing structured products such as reverse convertible bonds. It also provides tools for pricing and hedging structured products, as well as tools for monitoring and managing portfolios of structured products.