Reverse Convertible Note - RCN

AAA

DEFINITION of 'Reverse Convertible Note - RCN'

A synthetic instrument that shares characteristics with both bonds and stocks. A reverse convertible note (RCN) typically provides high coupon payments and final payoffs that depend on the performance of an underlying stock.

INVESTOPEDIA EXPLAINS 'Reverse Convertible Note - RCN'

RCNs have a face value that matures as shares or cash (this is up to the issuer), and a fixed coupon rate based on bonds. This allows investors to optimize the diversification of their portfolios without necessarily buying both stocks and bonds. RCNs typically have high commission fees, and are considered by some money managers to be highly risky and even toxic assets.

RELATED TERMS
  1. Synthetic

    A financial instrument that is created artificially by simulating ...
  2. Derivative

    A security whose price is dependent upon or derived from one ...
  3. Security

    A financial instrument that represents: an ownership position ...
  4. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. ISP (Internet Service Provider)

    A company that provides consumers, businesses, and other Internet ...
Related Articles
  1. Portfolio Mismanagement: 7 Common Stock ...
    Economics

    Portfolio Mismanagement: 7 Common Stock ...

  2. Massive Hedge Fund Failures
    Options & Futures

    Massive Hedge Fund Failures

  3. An Introduction To Reverse Convertible ...
    Options & Futures

    An Introduction To Reverse Convertible ...

  4. Convertible Bonds: Pros And Cons For ...
    Bonds & Fixed Income

    Convertible Bonds: Pros And Cons For ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center