Bond Education | Glossary
Participation Rate
The amount of leverage, usually expressed in percentage movement in the underlying asset, that characterizes the upside return of a Structured Product. Structured Notes often employ some degree of leverage or Enhanced Return on the upside, frequently combined with a cap on the return. The following is a list of the different types of participation: Straight Participation - Return is based on initial and final underlying levels; does not include averaging over more than 20% of the term of the investment. Participation Rate is fixed on pricing date. Averaging Participation - Return is based on periodic averaging for more than the final 20% of the term of the investment (tail averaging). Participation Rate is fixed on pricing date. Variable Participation - Participation Rate is not fixed on pricing date, and is dependent on changes in the underlying. Enhanced Participation - Positive investment return is based on change in underlying with a ratio greater than one.