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Puttable notes – Definition, Methodology, pricing

After the financial crisis and the concerns it raised about liquidity, especially in the fixed income secondary market, some investors in bank’s notes have wished to buy notes allowing them to recover their funds sooner than the original notes maturity date. As a result, a new type of products has emerged, known as puttable notes. These notes give to their holder an option of early redemption at par, such option being exercised at a set of predefined dates or within predefined periods. 

This CNO/FBA research paper is open for comments by all interested persons or institutions. Comments would be much welcome by 19 September cob, via the CNO/FBA web address or in writing to the CNO/FBA Chair or Secretaire General (8, rue du Mail, C/O ACI AFTB France, 75002 Paris).
This research paper does not aim at and should not be considered as giving any guidance on effective puttables contracts legal and financial characteristics. When disclosing this research paper, the CNO/FBA does NOT aim at setting standards but only to provide food for thought to all concerned parties and to promote a dialogue with the industry on this market segment. All features that are outlined in the research note shall be considered as possible examples and not as guidelines. Hence, no accountability of any sort shall be derived against the CNO/FBA from any possible usage that would be claimed as partially or totally based on the content of this research paper.

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last update 02 April 2021