Auto callable - Financial definition
Concise definition of the term auto callable
An auto callable is a structured financial product that is automatically redeemed before its maturity date if its underlying asset meets predetermined conditions.
Comprehensive definition of the term auto callable
An auto callable is a type of structured note or bond typically linked to the performance of an underlying asset, such as a stock index or a basket of stocks. It features automatic redemption if the underlying asset's price reaches or exceeds a specified level on predetermined observation dates. This mechanism allows investors to potentially receive higher yields compared to traditional bonds but also exposes them to market risk. Auto callables are often used by investors seeking enhanced income in a low-interest-rate environment, but they come with the risk of losing principal if the underlying asset performs poorly.