ABC of Certificates

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z 

A

Adjusted Return: In index calculation, "Adjusted Return" refers to a fixed annual deduction from the index performance. This deduction is applied daily aliquot to eliminate uncertainties regarding dividends. The abbreviation is AR. Dividends are not lost for certificate investors but enable a better payout profile for the certificate.

Annual Interest Payment Dates: In certificates with a fixed interest rate, investors receive the fixed interest amount and any additional interest on the predetermined annual interest payment days.

Annual Valuation Dates: On the annual valuation date, the underlying price is compared with the payout level in express certificates. The certificate is redeemed early if the underlying price is at or above the payout level, otherwise the term is extended by one year (up to the maximum term) if the underlying price is below the corresponding payout level. Annual valuation dates are predetermined.

Annualisation: In finance, interest rates or returns are typically annualized to compare financial products of different durations. Annualized returns are marked with "p.a." (per annum), meaning "per year."

Ask Price: The ask price is the price at which investors can buy a certificate. Contrary to: bid price

B

Bail-in: Bail-in refers to creditor participation, meaning creditors of a bank (i.e., investors) are involved in the losses during the bank's restructuring or resolution if the bank faces financial difficulties (threatened insolvency). Under these circumstances the resolution authority has wide-ranging powers to take action (so-called “bail-in instruments”). For example, it can reduce the claims of investors in respect of financial instruments to zero, terminate the financial instruments, or convert them into shares of the issuer and suspend investors’ rights. The Federal Act on the Recovery and Resolution of Banks (BaSAG) regulates this participation. More information can be found at raiffeisencertificates.com/bail-in.

Barrier: The barrier in a bonus certificate is the underlying’s price threshold that must not be touched or fallen below during the term to keep the bonus mechanism intact. If the barrier is breached, the bonus mechanism is suspended, and investors are exposed to full market risk.

Barrier Observation: The observation of the barrier determines if a specific price threshold (the barrier) is touched or breached. This can occur in 3 ways:

• Continuous observation: Every price of the underlying asset is considered.
• Daily observation: Only the daily closing prices of the underlying asset matter.
• Final value: Only the closing price of the underlying asset on the last valuation day is relevant.

Base Prospectus: The base prospectus is a legal document that provides detailed information about the issued financial instruments and thus constitutes the sole legal basis for potential transactions. For certificates issued by Raiffeisen Bank International AG, the base prospectus consists of the Registration Document approved by the Luxembourg Financial Market Authority (CSSF) and the Securities Note approved by the Austrian Financial Market Authority (FMA), together with any supplements and the respective Final Terms of the described financial filed with the FMA. See also: securities prospectus

Bearer Bond: Legally, certificates are bearer bonds of the issuer and thus represent freely tradable financial instruments. The issuer of Raiffeisen Certificates is Raiffeisen Bank International AG

Benchmark Index: A benchmark index is a reference index, for example, for a specific region or sector. Examples include the EURO STOXX 50^® Index as a benchmark for the Eurozone economy or the DAX^® for Germany. The MSCI World^® is a benchmark index for global stock performance.

Bid Price: The bid price is the price at which investors can sell a certificate. Contrary to: ask price

Bond: Our capital protection certificates from RBI are divided into the "Winner" and "Bond" series. While "Winner" certificates are geared towards rising prices, the "Bond" capital protection certificate generally offers returns even if the underlying price remains stable. The payout depends on the underlying's performance at a predefined payout level. Some "Bond" certificates also have a variable or fixed interest rate.

Bonus Certificate: Bonus certificates combine the opportunity for solid returns with partial protection of the invested capital down to the barrier. These investment products thus reduce risk compared to directly investing in the underlying and are suitable for almost any market phase. Bonus certificates belong to the category of investment products without capital protection. Please find more information in our "Certificate Knowledge Compact" brochure

Bonus Level: The bonus level in a bonus certificate is the price of the underlying relevant for repayment if the barrier is not breached during the observation period and the underlying quotes between the barrier and the bonus level at maturity.

Break-Even (Warrant): In warrants, the break-even point is the price of the underlying asset at which the profit from the warrant equals the acquisition cost.

C

Call: Buyers of a "call" warrant secure the right to buy the underlying asset at a specific price at a later date (considering the multiplier). This involves a disproportionate profit opportunity with increased risk up to total loss. See also: put

Cap: The cap represents the price of the underlying up to which certificate investors participate in price gains of the underlying, corresponding to the maximum payout amount. In bonus certificates with a cap, the cap usually equals the bonus level.

Capital Protection Certificate: Capital protection certificates offer either full (100%) capital protection, capital protection above 100% or capital protection with a deductible (e.g., 90%) at the end of the term for the invested capital and at the same time enable the safety-oriented audience of investors to participate in the performance of shares, indices or commodities. Depending on the structure of the certificate, investors participate directly in the performance of the underlying and/or earn interest income. Capital protection certificates are categorized as investment products with capital protection.
Please find more information in our "Certificate Knowledge Compact" brochure

Certificates: Certificates are securities based on one or more underlying assets such as stocks, indices, or commodities. Legally, they are bearer bonds and thus subject to issuer risk. There are certificates for every market scenario, meaning that one can benefit from rising, falling, or stable market phases with a suitable certificate. Additionally, the payout profile of certificates is predetermined, therefore, one always knows how the repayment will occur at the end of the term, depending on the underlying’s performance. Certificates are categorized into:

• Investment Products: Capital protection, bonus, express, discount, and index/participation certificates, as well as reverse convertible bonds
• Leverage Products: Warrants, factor, and turbo certificates
• Information on the individual categories is summarized in the "Certificate Knowledge Compact"

All certificates carry market, issuer, and bail-in risks. As with all securities, investing in certificates is also associated with risks, in particular the possible loss of a significant portion of the capital invested, up to and including total loss.

Certificate Savings: In certificate savings, wealth is gradually built up by regularly (monthly) investing a fixed amount. The term is unlimited. A certificate is not a savings account and is not covered by deposit insurance. Please note the issuer risk and the risk of creditor participation ("bail-in") - in such cases, a total loss of the invested capital can occur. More information can be found under Certificate Savings – explained!

Corporate Bonds: Corporate bonds are debt securities issued by companies. The coupon of a corporate bond depends on factors such as the general interest rate level and the issuer's creditworthiness. Bonds from companies with lower ratings are considered riskier and typically come with a higher interest rate.

Currency Risk: In certificates not denominated in the same currency as the underlying asset, exchange rate developments affect the certificate's value. This creates additional risks and opportunities.

D

Decrement: In index calculation using the "decrement" method, a fixed annual deduction is applied to the index performance. This deduction is applied daily aliquot to eliminate uncertainties regarding dividends. An example is the MSCI^® World Climate Change 4.5% Decrement Index. Dividends are not lost for certificate investors but enable a better payout profile for the certificate.

Delta: Delta indicates how much the price of a warrant changes when the price of the underlying asset rises by one unit. For calls, delta ranges from 0 to +1; for puts, from 0 to -1.

Discount Certificate: Buyers of a discount certificate purchase it at a price that offers a discount compared to the underlying's price. For this favorable access, investors accept an earnings cap, representing the maximum possible return. The certificate's discount buffers price declines of the underlying. Discount certificates belong to the category of investment products without capital protection. Please find more information in our "Certificate Knowledge Compact" brochure

Distance to Barrier: The distance to the barrier is the difference between the current underlying asset price and the barrier, calculated as a percentage. This distance is also called the safety buffer. See also: barrier

E

ESG: ESG (Environment, Social, Governance) has become the abbreviation for sustainable investing. It refers to ecological, social, and corporate factors of sustainability and the societal impact of an investment.

Exercise Style: The exercise style determines when the underlying asset can be bought or sold. European style means this can only occur at the end of the warrant's term, while American style allows it at any time during the term.

Express Certificate: Express certificates offer multiple opportunities for early repayment at a predefined payout price during the term. The underlying asset must close at or above the set payout level at the valuation date. If the underlying quotes below the defined payout level, the term extends by another period, and the possible payout price increases. Express certificates are part of the category of investment products without capital protection.
Please find more information in our "Certificate Knowledge Compact" brochure

F

Factor Certificate: Factor certificates allow leveraged participation in the underlying's performance. These certificates have a constant leverage factor, no knock-out, and an unlimited term. Long factor certificates can generate disproportionate gains in rising markets, while short factor certificates do so in falling markets. Factor certificates are part of the category of leverage products without knock-out. These leverage products offer disproportionate opportunities during a sustained trend and an equally leveraged risk. Please find more information in our "Certificate Knowledge Compact" brochure

Factor Level: The factor level in a factor certificate is adjusted daily to maintain the constant leverage factor. The factor level determines the amount financed (long) or invested (short) by the issuer.

Final Value: The final value is the closing price of the underlying on the certificate's final valuation date. It is usually compared with the starting value to determine the repayment amount for investors.

Fixed Interest Rate: Some certificates, such as reverse convertible bonds or certain bonus certificates, have a fixed interest rate. The fixed interest amount is paid periodically, usually annually, regardless of the underlying's performance.

Futures Market: The futures market is the counterpart to the spot market. In the futures market, the fulfillment of a transaction occurs at a future date. See also: spot market

G

Gamma: Gamma indicates how much the delta of an option changes when the underlying asset's price changes by one unit.

I

Index: A stock index reflects the performance of several stocks. Indices often refer to specific regions (e.g., ATX^®, DAX^®, FTSE^® 100) or sectors (e.g., EURO STOXX^® Banks, STOXX^® Europe 600 Basic Resources, STOXX^® Europe 600 Health Care).

Index/Participation Certificate: An index certificate exactly tracks the performance of an index; participation certificates follow the performance of a commodity or a basket of shares. A deviation from the one-to-one performance can occur if the underlying is traded in a different currency than the certificate or if the underlying is a commodity future. With index/participation certificates, investors can easily and transparently implement a rising (long) or falling (short) market expectation. Index/participation certificates are part of the category of investment products without capital protection.
Please find more information in our "Certificate Knowledge Compact" brochure

Intrinsic Value: In a call warrant, the intrinsic value is the difference between the current price of the underlying and the exercise / strike price, which can only be positive. Similarly, the intrinsic value of a put warrant is the difference between the strike price and the current price of the underlying.

Investment Products: Certificates are divided into investment products and leverage products. Each group includes various certificate types suitable for different investors, market phases, and security needs. Investment products usually have capital protection or partial protection, reducing risk compared to investing in the underlying asset (e.g., stock, stock index, or ETF). The balance between opportunities and risks is always well-adjusted. Therefore, investment products are suitable for a wide audience. All certificates carry market, issuer, and bail-in risks.

ISIN: The ISIN is an international security identification number that uniquely identifies all securities.

Issue Date: The issue date is the first day when a certificate can be traded on secondary market, usually the next trading day after the first valuation day. From this point in time, the security's term begins.

Issuer Risk: As bearer bonds, certificates are not covered by deposit insurance. If the issuer cannot meet its obligations from the certificate in case of insolvency (bankruptcy, over-indebtedness), certificate holders may lose a significant part of their invested capital up to total loss. This risk is often called "issuer risk" or "credit risk." The issuer of Raiffeisen Certificates is Raiffeisen Bank International AG

K

Key Information Document (KID): The KID is a legally required, standardized document containing essential information about a financial product. It helps investors understand the nature, risk, costs, and potential gains and losses of a product and compare it with other products.

Knock-out: A knock-out in a turbo certificate occurs if the underlying price touches or falls below (long) or exceeds (short) the knock-out barrier at any point during the certificate's term. In this case the certificate is immediately suspended from trading and repaid at the residual value. The knock-out barrier and the strike price of the turbo certificate are adjusted daily to take account of financing costs.

L

Leverage: The leverage indicates how much the price of a certificate reacts to a price change in the underlying asset. For example, in turbo certificates, the leverage indicates the percentage change in the certificate's price when the underlying asset's price rises or falls by one percent.

Leverage Factor: The leverage factor is a constant figure indicating the ratio at which the certificate follows the underlying's price movement.

Leverage Products: Certificates are divided into investment products and leverage products. Each group includes various certificate types suitable for different investors, market phases, and security needs. With leverage products, experienced market participants can achieve disproportionate gains from rising (long) or falling (short) prices of an underlying with a small capital investment. They are suitable for implementing a market expectation in the short term. However, if the market expectation is incorrect, it can result in a total loss of invested capital. Therefore, leverage products require a high-risk tolerance.

M

Market Capitalization: Market capitalization is the calculated total value of publicly traded shares of a company.
Calculation: Market capitalization = number of outstanding shares x share price

Market Risk: While certificates can optimize the risk-reward ratio, they cannot entirely eliminate market risk for investors. The price of a certificate is significantly influenced by the underlying's performance, but factors such as volatility and interest rates also affect the price. This is understood as market risk, which certificate buyers bear.

Maximum Amount: Depending on the payout profile of a certificate, a maximum payout amount may be set. The maximum amount represents the price ceiling up to which investors can participate in the underlying's price gains and is often defined as “cap”, as in bonus certificates with cap.

Moneyness: Moneyness in warrants relates the current price of the underlying to the exercise price (strike). For calls, the underlying's price is divided by the strike price, while for puts, the strike price is divided by the underlying's price. If moneyness is greater than 1, the warrant is "in the money." If it is below 1, the warrant is "out of the money." At a moneyness of 1, warrants are "at the money."

Multiplier: The multiplier indicates the number of units of the underlying to which a certificate refers. In case of a multiplier of 0.01 or 1:100, 100 units of a certificate refer to one unit of the underlying.

N

Nominal Amount: The nominal amount or nominal value (denomiation), is the smallest amount of money required to purchase a certificate. In Raiffeisen Certificates during the subscription period, this nominal amount is usually 1,000 euros. Investors can thus invest 1,000 euros or multiples thereof.

O

Omega: Omega is a measure in warrants that shows how much the price of a warrant changes when the price of the underlying changes by 1 percent. It is also called the effective leverage. Omega is calculated by multiplying delta (another measure showing how the warrant's price changes relative to the underlying) by the leverage. For example, if a warrant has a leverage of 10 and a delta of 0.5, the omega is 5. This means the warrant's price rises or falls by 5 percent if the underlying asset rises or falls by 1 percent.

Open-end: Certificates without a maturity date are called open-end certificates.

P

Participation: The participation rate indicates the ratio at which investors participate in the underlying's performance at the end of the term.

Payout Level: The payout level in express certificates is the price threshold relevant for (early) redemption. If the underlying's price closes at or above the payout level on a valuation day, the term ends early, and the express certificate is redeemed.

Payout Price: The payout price of an express certificate is the amount at which the express certificate is redeemed on the respective (early) redemption date.

Physical Delivery: In physical delivery, shares of the underlying are booked into the investor's securities account based on the initially determined number (= nominal amount/start value). In this event, certificate investors will become shareholders of the underlying company. Physical delivery can occur in express certificates and reverse convertible bonds. In such cases, the market value of the delivered shares will be below the nominal amount.

Premium: The premium on a warrant indicates how much more expensive it is to acquire the underlying by purchasing a warrant and exercising the option (call) or selling (put). Similarly, the premium on a bonus certificate indicates how much more expensive the certificate is compared to its underlying asset. The higher the premium, the higher the risk of loss if the barrier is touched or breached.

Primary Market: A significant portion of our investment products is offered "in subscription" before the stock exchange trading starts. During the subscription period, also called the primary market, the certificate can be purchased (subscribed) at the issue price. This period lasts about 4 weeks, during which the price remains constant. Afterwards, the certificate is traded on the secondary market. See also: secondary market

Protection Level: The protection level is the price threshold of the underlying at which the factor certificate's calculation is stopped, and a new trading day is simulated. The protection level serves as the reference price for recalculating the factor level.

Put: Buyers of a "put" warrant secure the right to sell the underlying asset at a specific price at a later date (considering the multiplier). This involves a disproportionate profit opportunity with increased risk up to total loss. See also: call

Q

Quanto: With certificates calculated "quanto," investors are protected against exchange rate risks. This means that the performance of the underlying asset occurs in a foreign currency, but the settlement is in the investor's home currency without exchange rate fluctuations affecting the result. For example, a euro investor could buy a quanto certificate on a US stock index. The certificate's performance depends only on the index's performance, not on euro-dollar exchange rate fluctuations. A hedging fee for eliminating exchange rate risk is included in the certificate's payout profile.

R

Redemption: Many certificates have a limited term and therefore a predefined redemption date. At this time, the certificate is redeemed.

Reverse Convertible Bond: Reverse convertible bonds and reverse convertible bonds with barrier come with a high interest rate. The interest amount is fixed and paid out regardless of the underlying asset's performance (one or more stocks). At maturity, the final stock price is relevant: repayment is either 100% of the nominal amount or investors receive shares in their securities account (keyword "physical delivery"). If the underlying asset performs differently than expected, you may become a shareholder of the company. The value of the delivered shares will be significantly below the nominal amount of the reverse convertible bond. Reverse convertible bonds belong to the category of investment products without capital protection. Please find more information in our "Certificate Knowledge Compact" brochure

Rho: A measure indicating how much the price of the warrant changes when the interest rate level rises by 1%.

S

Safety Buffer: The distance to the barrier is the difference between the current underlying asset price and the barrier, calculated as a percentage. This distance is also called the safety buffer. See also: barrier

Secondary Market: Certificates traded on the secondary market can be bought or sold at any time during trading hours. Some certificates are prior offered on the primary market (with subscription at a constant issue price) before the stock exchange starts. See also: primary market

Small Caps: Small caps refer to stocks with a low market capitalization compared to the industry or country.

Spot Market: The spot market is the counterpart to the futures market. On the spot market, transactions are concluded and settled immediately. See also: futures market

Spread: The spread is the percentage difference between the selling price and the buying price of a security, also known as the bid-ask spread.

Starting Value: The starting value is the price from which further price thresholds are calculated at the beginning of the certificate's term. Typically, it corresponds to the closing price of the underlying on the first valuation day and can be expressed either as a percentage (100%) or as an absolute value.

Stock Exchange Listing: The stock exchange listing indicates where a certificate can be traded. Raiffeisen Certificates are usually listed on the Vienna and Stuttgart stock exchanges.

Strike Price: In case of warrants, the strike, also called exercise price, is the price at which warrant holders can buy or sell the underlying (considering the multiplier). In practice, exercising a warrant usually results in a cash settlement equal to the intrinsic value rather than physical delivery of the underlying asset.

Structured Products: Structured products are securities, based on an underlying. Certificates are considered structured products. The payout profile is typically depicted by combining option components and bond components. Investing in securities involves opportunities and risks.

Subscription: A significant portion of our investment products is offered "in subscription" before the stock exchange trading starts. During the subscription period, also called the primary market, the certificate can be purchased (subscribed) at the issue price. This period lasts about 4 weeks, during which the price remains constant. Afterwards, the certificate is traded on the secondary market.

U

Underlying: A certificate is based on an underlying asset and is linked to its performance. The underlying can be any instrument traded on a regulated market (exchange) and liquid, such as one or more stocks, an index, a currency, a commodity, etc. The performance of the underlying significantly - among other factors - influences the certificate's value.

V

Value Date: The value date is the date on which the debit for the purchase or the credit for the sale or redemption of a security is made in the investor's account, usually: trade date + 2 days.

Valuation Days: In express certificates, there are periodic valuation days during the term relevant for (early) repayment. On each of these dates, the closing price of the underlying is compared to the payout level.

Vega: A measure indicating how much the price of the warrant changes when the volatility of the underlying asset rises by 1%.

Volatility: Volatility is a measure of the price fluctuation of a financial instrument, such as a stock, over a specific period. High volatility means larger price swings and thus higher risk, while low volatility indicates smaller price swings and lower risk. Volatility is often used as an indicator of risk and uncertainty in the markets.

W

Warrant: Warrants enable risk-tolerant market participants to benefit disproportionately from rising or falling prices of an underlying asset with a small capital investment. Warrants belong to the category of leverage products without knock-out. Please find more information in our "Certificate Knowledge Compact" brochure

Winner: In our capital protection certificates from RBI, we distinguish between the "Winner" and "Bond" series. While a "Bond" certificate typically yields a return with a stable underlying price, investors are better of with a "Winner" capital protection certificate when prices rise. Investors benefit directly from the positive (average) price performance of the underlying according to the participation factor.

WKN: The WKN (Wertpapierkennnummer) is the German equivalent of the ISIN. The 6-digit combination of numbers and letters allows the unique identification of securities.

Worst-of: In certificates with more than one stock or index as the underlying, repayment at the end of the term is based on the stock or index with the worst performance.

X

Y

Year-to-date (YTD): Year-to-date refers to the period from the beginning of the year to the current day. YTD performances are often considered in finance.