Autocallable notes

Definition

An autocallable barrier note is a fixed-term contract on an underlying price with four features:

1. Coupon. On each scheduled observation date the note pays a fixed coupon if the observed price is at or above the barrier.
2. Autocall. On any scheduled observation date except the strike and the maturity, if the observed price is at or above the autocall level the note ends immediately: principal is returned together with that observation’s coupon.
3. Barrier. At maturity, if the observed price is at or above the barrier the note repays principal in cash together with the final coupon.
4. Knock-in. At maturity, if the observed price is below the barrier the note repays principal in the underlying at the initial price. The holder therefore receives an asset worth less than principal.

In Note Systems the observation schedule is fixed at creation, the barrier is observed only on scheduled dates (a “European” or discrete barrier, not continuous), and knock-in is judged only at the final observation. There is no memory feature: a coupon missed at one observation is not recovered later.

Parameters

Parameter	Meaning	Specification default	Label
s0	Initial level, the official close at the strike observation, 1e8 precision	Fixed per series at strike	fact
autocallBps	Autocall level as bps of s0	10 000 (100%)	fact
barrierBps	Barrier as bps of s0	6 500 (65%)	fact
observations[]	Strictly ascending official-close timestamps; index 0 is strike, last is maturity	Set per series	fact
couponBps	Coupon per observation as bps of matched notional	Discovered at strike within [couponFloorBps, couponCapBps]	fact
couponCapBps	Governance cap for coupon discovery, also sizes SHIELD’s prefund	400 (4% per observation)	fact
notionalCap, minTicket	Series size limit and minimum deposit, USDG	Set per series	fact

COUPON payoff at maturity

COUPON redemption at maturity per 100 USDG of matched notional, excluding coupons paid at earlier observations. The step at the barrier is the knock-in. Above S0 the note would normally have autocalled at an earlier observation. Coupon shown at 1.5% per observation (illustrative).

SHIELD payoff at maturity

SHIELD is the mirror. Per 100 USDG of matched notional, SHIELD ends with:

• Barrier holds: its Stock Tokens back, plus the unused part of its coupon prefund. Net cost = coupons actually paid.
• Barrier breached at maturity: 100 USDG, and its Stock Tokens are delivered to COUPON holders. Relative to simply holding the stock, SHIELD has gained 100 − 100 × S_T / S0 minus coupons paid.

SHIELD value at maturity per 100 USDG notional when the series has not autocalled. The solid line assumes all 26 coupons were paid at 1.5% (39 per 100, illustrative). Below the barrier the put pays: SHIELD delivers stock and receives 100 USDG.

Why the coupon is high

The COUPON holder is short a down-and-in put struck at S0 and long a coupon stream. The coupon is the option premium, paid in instalments. Higher implied volatility, a higher barrier, or a longer time to maturity all raise the value of that put and therefore the coupon that clears the market. In Note Systems this is discovered per series from deposit imbalance rather than quoted by a dealer. See Coupon discovery.

Comparison with adjacent products

Product	Downside	Upside	Term
Autocallable barrier note (COUPON)	Stock below barrier at maturity: receive stock at S0	Capped at coupons; called early if stock at or above S0	Ends early on autocall
Reverse convertible	Same knock-in, usually no autocall	Capped at coupons	Fixed
Covered call	Full stock downside	Capped at strike plus premium	Rolling
Vanilla put (for SHIELD comparison)	Premium paid up front	Protection at strike from day one	Fixed
SHIELD	Pays coupons while barrier holds; protection off on autocall	Down-and-in put at S0	Ends early on autocall