Indexed Currency Option Notes (ICONs)

A variant of the dual currency bond with all payments in one currency but with the principal payment indexed to a currency exchange rate at maturity. If the exchange rate is less than an agreed rate, the bond holder receives the face value of the note minus an amount which (typically) increases as the exchange rate declines. Within this generic structure, a number of variations are possible, including a reversed version which provides that the principal payment increases with a decline in the exchange rate. This structure has attracted more publicity than users. See Reverse Dual Currency Bond. See also Dual Currency Bond, Principal Exchange Rate-Linked Securities (PERLS).

Glossary * I