Principal Protected Notes (PPN) - FRM Part 1

Principal protected note (PPN) allows an investor to benefit from the increase in an assets value without taking any risks ( such as make any losses due to the decrease in an assets value).

PPN can be constructed using a zero coupon bond and a long call option where the underlying of the call option is linked to the asset to which the investor is willing to be exposed to.

Principal protected note is an investment where the principal is protected and at maturity the investor will receive the principal ( worst case) or principal and some income due to the exposure the PPN had on another asset ( such as an index)

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