Dual currency bond

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The double currency bond ( English Multi Currency Note , English Dual Currency Bond ) is a bond denominated in two currencies .

General

With it, the payment of the nominal value , the redemption and the interest payment can take place in different currencies, so the issue amount of the bond can be given in a different currency than the redemption. Often the issuer or the creditor is given a choice. To the resulting exchange rate risk to reduce, it is possible that bond with a put option for the creditor and / or with a purchase option for the debtor equip.

Dual currency bonds are not part of the standard bonds .

Types of dual currency bonds

A distinction is made between the following variants:

  • Foreign Currency Bond (interest payments are not made in the issue currency );
  • Currency-Change Bond (the interest payments are made in different currencies, these being determined at the time of issue);
  • Heaven and Hell Bond (bond whose repayment amount is linked to an index);
  • Purgatory and Hell Bond (Capped Heaven and Hell Bond) (Heaven and Hell Bond with an upper / cap limit on the amount of repayment);
  • Reverse Forex linked bond (Heaven and Hell Obligation whose repayment value is inversely linked to the exchange rate);
  • Marginal Reverse Forex linked bond (repayment is made at face value unless the linked currency rises above a predetermined value);
  • Index Currency Option Notes (ICON) (´the coupon is fixed in a currency, the payment is made at least at the nominal value, but can increase depending on the exchange rate upon repayment).

Example of a dual currency bond

Dual currency bond
  • Issue in euros ,
  • Interest like the issue in euros ,
  • Redemption different from issuing in yen .

Individual evidence

  1. ^ Günther Wöhe, Introduction to General Business Administration , 22nd edition, Munich, Verlag Vahlen, 2005, p. 700
  2. ↑ Roger Zantow / Josef Dinauer, Finanzwirtschaft des Unternehmens, The basics of modern financial management , 4th, updated edition, Munich, Pearson Studium Verlag, 2016, p. 249
  3. ↑ Hans Paul Becker: Investment and Financing , 6th Edition, Wiesbaden, Springer Gabler Verlag, 2013, p. 214
  4. ↑ Gablers Wirtschaftslexikon, keyword: double currency bond accessed August 28, 2015
  5. ^ Reto R. Gallati: Interest-bearing securities, valuation and strategies , 3rd edition, Wiesbaden, Gabler Verlag, 2011, p. 159