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. Convertibles

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

    A debt investment in which an investor loans money to an entity ...
  3. Synthetic

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

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

    A financial instrument that represents: an ownership position ...
  6. Surrender Period

    The amount of time an investor must wait until he or she can ...
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 ...

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center