Targeted Accrual Redemption Note (TARN)

What is a ‘Targeted Accrual Redemption Note – TARN’

A targeted accrual redemption note (TARN) is an investment vehicle, calculated based on a variation of the LIBOR formula, which provides a guaranteed sum of coupons. Once the coupons you’ve received reaches the target cap, the note will be redeemed and you will be paid the par value of the note. Targeted Accrual Redemption Notes (TARN) typically have coupon payments that are based on an inverse floating LIBOR calculation. Thus, they may have good performance in the short-term if interest rates decrease, but may also underperform if interest rates rise.

Explaining ‘Targeted Accrual Redemption Note – TARN’

One of the more distinguishing features of a TARN is the possibility of an early termination. It is based on a predetermined accumulation of the coupons. Once that sum is reached, the investor receives the final payment of par and the contract ends.

Targeted Accrual Redemption Note (tarn) FAQ

What is a target redemption forward?

Target redemption forward (TARF) is an organized forward agreement that permits you to trade at a superior rate than a normal forward agreement by incorporating leverage and a profit cap level.

Further Reading

  • Some contributions to sequential Monte Carlo methods for option pricing – [PDF]
  • A stochastic local volatility technique for TARN options – [PDF]
  • Estimating option prices using multilevel particle filters – [PDF]
  • Perturbation stable conditional analytic Monte-Carlo pricing scheme for auto-callable products – [PDF]
  • Callable Swaps, Snowballs and Videogames – [PDF]
  • Zerokosztowe strategie zabezpieczające typu offensive hedging w kontekście problemu opcji walutowych w gospodarkach wschodzących w latach 2007–2009 – [PDF]
  • More Exotic Features and Basis Risk Hedging – [PDF]