Liability Knock-Out TARF

Target Accrual Redemption Forward; Target Profit Forward with a Liability Knock Out which will eliminate the leverage/liability.

The addition of the Liability Knock-Out feature is a powerful risk mitigant tool that will eliminate the risk of leverage were the LKO barrier to be triggered. The LKO can either be modelled on a European or American basis. Furthermore, variations of this strategy (Accelerated/Advanced LKO TARF) would see the strategy terminate upon the triggering of the LKO barrier, with any outstanding Target balance paid upfront to the client.

Payoff Diagram:

Payoff at Expiry:

If the Liability Knock-Out Barrier has not been triggered prior to expiry:

At expiry if EURUSD fixes:

• Above the Strike, the client is fully protected at the Strike on 100% of the Notional subject to the target condition. Once the target is reached the strategy is cancelled and the client will become unhedged.

• Below the Strike, the client will find itself obligated to trade at the Strike level on 200% of the Notional.

If the Liability Knock-Out Barrier has been triggered prior to expiry:

At expiry if EURUSD fixes:

• Above the Strike, the client is fully protected at the Strike on 100% of the Notional subject to the target condition. Once the target is reached the strategy is cancelled and the client will become unhedged.

• Below the Strike, given that the leverage has been reduced from 200% to 0%, the client no longer facing any obligations and can transact at the more favourable market rate.