Autocallable Note

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  • Data API.
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Autocallable Note Pricing

FinPricing covers the followig autocallable models:

  • Autocallable Note
  • Autocallable Note with Rainbow
  • Autocallable Note with Best Of or Worst Of
  • Autocallable Note with Memory Coupon
  • Autocallable Note with Knock Out (European or American)
  • Autocallable Note with Range Accrual
  • Autocallable Note with Barrier Shift
  • Autocallable Note with Averaging Level
  • Autocallable Swap with Knockin
  • Check FinPricing valuation models

1. Autocallabe Note Introduction

Autocallable notes are medium-term to long-term, principal-protected notes that provide periodic coupons that are linked to the performance of a basket of equities. There is a knock-out barrier level for the total coupon amount; if reached, the notional is returned and the deal is cancelled.

At each observation date, the note is revaluated. If the asset level is below the reference price, the note contiues and pays an increased coupon for the next period. At maturity, if the asset level is down but still above a pre-determined barrier level, the note pays the principal without coupon. If the asst level is down below the barrier level, the note pays a return associated with the performance.

Autocallable sometimes pays memory coupons. At an observation date, if the reference price is below the reference level, the investor will not get any coupon. The note will continue until the next observation date. If all conditions are met at one observation date, the note will pay any coupons that have not been paid on previous observation dates.

Autocallable notes offer a higher coupon than regular bond. It gives investors protection of investment against a price drop to certain level. Autocallable is suitable for investors who believes that market will not sink too much and seeks enhanced yield


If, on any Call Observation Date, the sum of the Coupon Payments determined on each Coupon Determination Date up to and including such Call Observation Date is greater than or equal to the Call Level, then the notes will be automatically called. If the notes are automatically called, on the corresponding Call Payment Date, you will receive an amount in cash equal to the Deposit Amount plus the Coupon Payment for the corresponding Coupon Payment Date. After the note is automatically called, you will not participate in any future appreciation of the basket stocks and will receive no further Coupon Payments.

2. Autocallabe Note Valuation

Autocallabe payoff is based on a basket of stocks. The levels for the fixed coupon payments, auto call observations, range accrual observations, averaging, and maturity barrier observations are all based on basket levels. These levels can be independent of each other and set to any of the level types.

The Coupon Rate for each Coupon Payment Date will equal the sum of the weighted percentage changes of the Reference Stocks. The “weighted percentage change” for each Reference Stock will equal (i) the Stock Performance for that Reference Stock on the applicable Coupon Determination Date multiplied by (ii) the applicable Stock Weighting. The Coupon Rate shall not be less than 0%.

The Initial Share Price will equal, for each Reference Stock, the Closing Price of one share of each Reference Stock on the Trade Date, as set forth in the table below.

The Final Share Price will equal, for each Reference Stock, the Closing Price of one share of each Reference Stock on the applicable Coupon Determination Date, in each case subject to postponement in the event of a Market Disruption Event.

The weighted sum of asset returns is relative to an initial level of the assets in the basket:

weighted sum of asset returns in FinPricing

The weighted sum of the asset price levels in the basket is

weighted sum of prices in FinPricing

The interest rate is computed as

Equity component PDE of convertible bond valuation in FinPricing

The payoff is complex and different depending on various conditions. For instance, the payoff with barrier is given by

Equity component PDE of convertible bond valuation in FinPricing

The valuation is conducted by the quanto Monte Carlo simulation, which incorporates the volatility skew of the underlying stocks. The risk sensitivities are calculated using the finite difference approach.

3. Related Topics