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Daily range accrual

What is daily range accrual?

Daily range accrual is a financial instrument, typically used in structured products or derivatives, that accrues interest based on the daily price movements of an underlying asset, like a stock or an index.

An example of a daily range accrual investment

Based on a 3.50% Income Semi-Annual Daily Range Accrual Note

The illustration is split into two sections:

  1. The investment terms briefly outlines the terms of the trade.
  2. The flowchart shows the potential returns the investor will earn over the life of the trade and how these returns are dependent on the performance of the index.

Investment terms

  • 6 year term
  • Maximum income of 3.50% semi-annually
  • Income dependent on how many days the Index has closed within the range of 6500 - 7500
  • Maximum total return of 42%
  • Capital is protected if the Index is above 3500 at the end of the 6 years
  • If the Index is below 3500 at maturity the 1p capital will be lost for every 1% fall in the Index​

Payoff summary: How is the income paid?

Commonly asked questions

Structured products risk information

Credit risk

The holder of the investments will be exposed to the credit risk of the issuer. A decline in the issuers credit quality is likely to reduce the market value of the product and therefore the price an investor may receive for the product if they sell it in the market.

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Market risk

Capital repayment depends on the performance of the underlying; the future performance of which cannot be guaranteed.

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Liquidity risk

The investments will not be traded on an organised exchange. The issuer will use reasonable efforts to quote prices in all market conditions.

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Exit risk

The secondary market price of the investments will depend on many factors including, but not limited to, the value and volatility of the underlying index, interest rates, dividend rates, time remaining to maturity and the creditworthiness of the Issuer. Prior to maturity, the price may be less than the amount the holder would have received on maturity of the investment.

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Tax risk

The tax treatment of structured products can be complex and tax rates and regulations may change during the term of this investment. Guidance is given here, but if in any doubt investors should seek their own professional tax advice.

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Time horizon

Whilst an investor might be happy with the capital erosion prospects at maturity, the reference index/indices may fall throughout the life of the security and the security might fall by more than you would expect.

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