Business and Personal Finance Dictionary

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• STRUCTURED NOTES
  
  The broad, regulatory definition of this term is debt securities whose cash flow characteristics (coupon, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. For example, since the early 1990s, U.S. government agencies have been issuing unsecured bonds and notes with coupons that are fixed for a predetermined time and then increase or step up to a higher amount if the securities are not called. Embedded forwards and options in the structure of notes allow underwriters to create an unlimited number of risk/reward profiles and to customize risk characteristics to fit an investor’s desired risk exposure. By this broad definition, structured notes include all CMOs. However, the term also includes a variety of other securities that are not necessarily mortgage related. In fact, many structured notes are not mortgage backed and some definitions of this term explicitly exclude mortgage-backed securities. Sometimes called hybrid securities.
  
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