A bond-related financial derivative. Basically, it is a – bond where the redemption is linked to the price of another financial instrument. However, the issuer – divides the issue into two tranches. – The first (bull tranche) is related to a rising, the second tranche (bear tranche) to a falling price of the underlying (bond whose principal repayment is linked to the price of another security. The bonds are issued in two tranches: in the first tranche repayment increases with the price of the other security, and in the second tranche repayment decreases with the price of the underlying security). This means that a subscriber to the bond has the chance to make a handsome profit on the maturity date. However, there is also the possibility that at the end of the term, i.e. on the maturity date, the subscriber will receive nothing if the underlying security has fallen to zero. – In principle, there is no risk for the issuer because, as a rule, he does not have to repay more money overall than planned for the maturity date (since the two tranches offset each other, the issuer has little risk). In detail, there are many special forms of this derivative, especially with regard to the choice of underlying.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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