Despite losing ground to autocalls as the high yield structured product of choice, reverse convertibles retain decent market share. For the purposes of this article, reverse convertibles are defined as income seeking structured products with a fixed maturity and which are capital-at-risk through the presence of a European or American barrier.
Two main types of reverse convertible exist: those that pay fixed unconditional income through the life of the product and those that have contingent income, typically paid if all underlyings are above a coupon barrier level. For example, a product may be linked to a single stock and have a European barrier of 60% which determines whether it will repay full capital. The fixed income version might pay a coupon of 10% at a given frequency (quarterly, for instance). The contingent income version i
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