Money Back Certificates

Any of a family of hybrid instruments which promises the investor the return of her original investment at a minimum. Cash that might ordinarily be paid as yield goes to pay for exposure to any of a variety of equity, interest rate, commodity, and/or currency exposures. These hybrids are usually best analyzed by dividing the original investment into a zero coupon bond that will appreciate to the value of the original investment over the life of the instrument to provide the money back component and the balance which is used to buy an option, invest in a commodity pool, etc. See, for example, Equity-Linked Note (ELN) (diagrams), Money Back Options or Warrants.

Glossary * M