Exchange Traded Notes - ETN

AAA

DEFINITION of 'Exchange Traded Notes - ETN'

A type of unsecured, unsubordinated debt security that was first issued by Barclays Bank PLC. This type of debt security differs from other types of bonds and notes because ETN returns are based upon the performance of a market index minus applicable fees, no period coupon payments are distributed and no principal protections exists.

INVESTOPEDIA EXPLAINS 'Exchange Traded Notes - ETN'

The purpose of ETNs is to create a type of security that combines both the aspects of bonds and exchange traded funds (ETF). Similar to ETFs, ETNs are traded on a major exchange, such as the NYSE during normal trading hours. However, investors can also hold the debt security until maturity. At that time the issuer will give the investor a cash amount that would be equal to principal amount (subject to the day's index factor).

One factor that affects the ETN's value is the credit rating of the issuer. The value of the ETN may drop despite no change in the underlying index, instead due to a downgrade in the issuer's credit rating.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Exchange Traded Products – ETP

    A type of security that is derivatively-priced and which trades ...
  3. Debt Security

    Any debt instrument that can be bought or sold between two parties ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Structured Note

    A debt obligation that also contains an embedded derivative component ...
  6. Unsecured Debt

    A loan not backed by an underlying asset. Unsecured debt includes ...
RELATED FAQS
  1. For investors, what are the alternatives to owning physical gold?

    Some of the many alternatives investors have to purchasing physical gold include investing in gold futures, gold ETFs, gold ... Read Full Answer >>
  2. Are ETFs subject to the short sale uptick rule?

    Mutual fund use and development has increased rapidly ever since they were first introduced in the early 1920s. In the United ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Exchange Traded Notes: An Alternative To ETFs

    ETNs offer yet another way to track an index. Find out what they have to offer, and what's at stake.
  2. Mutual Funds & ETFs

    Finding Fortune In Foreign-Stock ETFs

    Think beyond your borders to reduce the impact of local market downturns.
  3. Mutual Funds & ETFs

    Active Vs. Passive ETF Investing

    You can use these securities for more than just indexing. Explore the spectrum of possible ETF strategies.
  4. Options & Futures

    Uncovering The ETF Wrap

    Tax benefits, low expense ratios and flexibility - discover the advantages of this managed money product.
  5. Mutual Funds & ETFs

    The VIX: Using The "Uncertainty Index" For Profit And Hedging

    Learn the best ways to profit and hedge using the Chicago Board Options Exchange Market Volatility Index.
  6. Mutual Funds & ETFs

    ETN Credit Risk May Outweigh Benefits For Some

    Exchange-traded notes have many benefits, but they may not be suited to risk-averse investors.
  7. Chart Advisor

    Traders Look To Dividend Funds (VIG)

    When uncertainty creeps into the mind of an active trader it is not uncommon for this type of person to turn toward the safety of dividends.
  8. Mutual Funds & ETFs

    The Impact of the Janus Market Timing Ruling

    A look at the impact of the Janus Supreme Court ruling on market timing.
  9. Mutual Funds & ETFs

    These 4 Precious Metals ETFs Help Combat Inflation

    A look at 4 precious metal ETFs to combat inflation when it hits.
  10. Mutual Funds & ETFs

    Preferred Stock ETFs: Are They Right for You?

    Considering preferred stock ETFs? Here's a look at their pros and cons.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center