Payout Scenarios
Last updated
Last updated
Investors should be familiar with the four revenue scenarios of VETA's Phoenix products. The following diagram illustrates the different characteristics of the revenue scenarios. Please refer to the Glossary of Terms for the exact meanings of the terms used in each diagram.
In the following analysis of revenue scenarios, assuming the example Phoenix product is:
Principal: $10,000
Term: 6 months
Monthly knock-out observation, real-time knock-in observation
Underlying asset: BTC
Coupon：2%（Monthly）
Scenario 1: No knock-in and knock-out
Scenario 3: No knock-out after knock-in; the expiration price is lower than the initial price
Scenario 4: No knock-out after knock-in, the expiration price is higher than the initial price
What does this scenario mean?
At each knock-in/knock-out observation point during the product's operation, the price of the underlying asset has not exceeded the knock-out price nor fallen below the knock-in price. In this case, investors can receive all the coupon payments. In the diagram below, for each knock-in/knock-out observation point within the 6-month period, there have been no knock-in or knock-out events for BTC, and investors receive full repayment of the principal and coupon. As there have been no knock-ins, investors can receive coupon payments for the entire 6 months at a rate of 2% per month, resulting in a total absolute return of 12%.
Investor's return:
Coupon interest = $10,000*6*2% = $1,200（6 months）
Remaining principal = $10,000
Total return = $10,000+$1,200 = $11,200（6 months）
Rate of return = 12%（6-month absolute return）
What does this scenario mean?
On one of the knock-out observation days during the product's operation, if the price of the underlying asset is higher than the knock-out price, the product is knocked out and ends. Coupon payments are only made on monthly observation days where the closing price is higher than the knock-in price, and not on days where the closing price is lower. In the diagram below, on the knock-out observation day in the fourth month, the price of BTC is higher than the knock-out price, resulting in the product being knocked out. As there have been no knock-ins, investors can receive coupon payments for 4 months, at a rate of 2% per month, resulting in a total absolute return of 8%.
Investor's return:
Coupon interest = $10,000*4*2% = $800（4 months）
Remaining principal = $10,000
Total return = $10,000+$800 = $10,800（4 months）
Rate of return = 8%（4-month absolute return）
What does this scenario mean?
On one of the knock-in observation days during the product's operation, if the price of the underlying asset is lower than the knock-in price and the final maturity price is lower than the initial price, the knock-in event occurs. In the diagram below, BTC experiences a price lower than the knock-in price during the product's duration. At the product's maturity, investors bear the loss from the decline in the underlying asset. Based on this, for the 4 monthly observation days where the closing price did not fall below the knock-in price, investors receive 4 coupon payments, resulting in a total of 4 months of coupon interest at a rate of 2% per month, yielding a total absolute return of 8%.
Investor's return(assuming a 5% decline in the underlying asset):
Coupon interest = $10,000*4*2% = $800（6 months）
Remaining principal = $10,000*(1-5%) = $9,500
Total return = $9,500+$800 = $10,300（6 months）
Rate of return = 3%（6-month absolute return）
What does this scenario mean?
Investors do not need to bear any losses and can receive a 10% (2%*5) interest payment for the months that the knock-in event does not occur. Of the six observation dates, if the underlying asset's price is above the knock-in price for five of the observation dates, the investor will receive five interest payments. For instance, if an investor were to invest $10,000 in this product, they could expect to receive a total of $11,000 in principal and interest over five months in this scenario.
Investor's return:
Coupon interest = $10,000*5*2% = $1,000（6 months）
Remaining principal = $10,000
Total return = $11,000（6 months）
Rate of return = 10%（6-month absolute return）
