Payout Scenarios
Last updated
Last updated
Investors should be familiar with VETA's Trigger products' four types of revenue scenarios. Please refer to Glossary of Terms for the exact meanings of the terms used in each diagram.
In the following scenario analysis, assuming the example Trigger product is:
Principal: $10,000
Term: 6 months
Monthly knock-out observation
Underlying asset: BTC
Coupon rate: 10% (non-annualized)
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?
On each observation day during the product's operation, the price of the underlying asset has not exceeded the knock-out price or fallen below the knock-in price. In the diagram below, for each knock-in/knock-out observation day 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. Please note that in Trigger products, the coupon interest is calculated based on a non-annualized rate.
Investor's return:
Coupon interest = $1,000（6 months）
Remaining principal = $10,000
Total return = $11,000（6 months）
Rate of return = 10%（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. 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. Investors receive full repayment of the principal and coupon. Please note that in Trigger products, the coupon interest is calculated based on a non-annualized rate.
Investor's return:
Coupon interest = $1,000（4 months）
Remaining principal = $10,000
Total return = $11,000（4 months）
Rate of return = 10%（4-month absolute return）
What does this scenario mean?
On one of the knock-in observation days during the product's operation, the price of the underlying asset is lower than the knock-in price and the final maturity price is lower than the initial price. 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. This is the only scenario where investors incur a loss.
Investor's return (assuming a 5% decline in the underlying asset):
Coupon interest = $0（6 months）
Remaining principal = $9,500
Total return = $9,500（6 months）
Rate of return = -5%（6-month absolute return）
What does this scenario mean?
On one of the knock-in observation days during the product's operation, the price of the underlying asset is lower than the knock-in price and the final maturity price is higher than the initial price. 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 do not incur any losses; however, they also do not receive any coupon interest.
Investor's return:
Coupon interest = $0（6 months）
Remaining principal = $10,000
Total return = $10,000（6 months）
Rate of return = 0%（6-month absolute return）
