Glossary - G
This section provides an explanation for some of the jargon used to describe structured retail products. If you would like us to add additional words then please let us know by clicking here.
Geared Reverse Convertible
This is a type of Reverse Convertible high-income product. The distinction with the “Geared” version is that if the underlying index is lower that its starting level at maturity then the investors capital is reduced on a greater than one-for-one basis.
For example, a geared product with 200% gearing would result in capital being reduced on a 2:1 basis. In other words if the underlying index had fallen by 15% over the term of the product then only 70% of the investor’s capital would be returned. In this case the product could be described as having 200% downside gearing.
The term gearing refers to the leverage or exposure that a product has to movements in the underlying index.
A product with 100% gearing would generate a return exactly equal to any rise of the underlying index i.e. a 45% rise in the index would produce a 45% return from the product. A product with only 75% gearing would produce a return equal to only 75% of the return produced by the underlying index and similarly a product with 200% gearing would produce a return equal to twice any rise in the index.
Sometimes the term participation is used also used to refer to a products gearing. See also downside gearing.
A Guaranteed Investment (Interest) Certificate is a deposit investment security sold by Canadian banks and trust companies. It is guaranteed by the provider and the principal is insured (subject to certain limits) by a deposit insurance agency such as the Canada Deposit Insurance Corporation.
This is a term associated with cliquet products. Such will sometimes provide a minimum return that is more than just the full return of the capital invested. In this case it would have a global floor of something greater than 100%.
For example a cliquet that offered a minimum return of 105% of the sum invested would have a global floor of 105%.
The gross margin, before commissions and other costs, that the product generated. This can be entered either as an upfront figure i.e. 4.50% or as an annualised figure, for example as a spread to LIBOR i.e. 0.50% pa.
Growth and Income product
Some types of structured product are offered with a linked fixed rate investment, usually a deposit paying a higher than market rate of interest. These products are sometimes called back-to-back products.
To differentiate these products from both standard growth products and structured income products, we term such products Growth and Income products.
A growth product is a type of structured product that produces all its return at maturity with no payments of income during the product term.
A growth product is often, but not always, a product that provides a minimum return of 100% of the sum invested.