Coggit Tool Information: Risky Income Plan

This is a tool that calculates the historical performance of a risky income plan and displays a wide range of calculated performance factors for ready comparison with other structured product plans. In more detail, the plan is tested at historical points, going back over a hundred years, and at each point the various performance factors are calculated. These performance factors are then averaged over all the historical tests to provide the displayed historical performance results. A description of each of the results shown is given below after the details on the input data required. In addition, for further comparison, the tool calculates the historical results of a stock market investment over the same period as the plan.

Note: If there is no risk element to the plan, please use the Protected Income Plan tool instead. If the plan doesn't generate income and cannot mature early as a result of a kick-out, please use either the Protected, or Risky, Growth Plan tool. If the plan can mature early as a result of a kick-out, please use one of the Protected, or Risky, Kick-Out Plan tools.

The information required for the historical performance calculations can be considered in seven parts, matching the layout of the tool.

The first part is the standard plan data, which is described in the following list:

The start date of the plan.
Either the end date of the plan or its term in years, with the other one being calculated.
The base return, which is the base return on investment that will be received when the plan matures, and is typically 100%. Any income or additional positive return (growth) is added to this base return and any calculated negative return (risk) reduces it. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

The second part of the information required for the historical performance calculations is the start price (initial index level) data, which is either basic or advanced. In the basic case, it is only necessary to input a single date, on which the closing value of the market (or markets) is obtained. In the advanced case, observation over a pricing range or series of pricing points is needed in order to calculate the start price. In more detail, in the advanced case, the following information is required:

The price type, which is the average, highest or lowest price of the observed price (market) values.
The observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the highest or lowest pricing cases, the observation frequency can also be continuous. In the continuous observation case, the highest or lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The price start date, which is either inputted or calculated. If inputted, the tool calculates the number of pricing observations from the start and end dates and the observation frequency.
The price end date.
The number of observations, which is either inputted or calculated. If inputted, the tool calculates the price start date from the number of observations, the price end date and the observation frequency. Note: In the continuous observation case, the number of observation days is used instead of the number of observations.

The third part of the information required for the historical performance calculations is the end price (final index level) data, which is either basic or advanced. In the basic case, it is only necessary to input a single date, on which the closing value of the market (or markets) is obtained. In the advanced case, observation over a pricing range or series of pricing points is needed in order to calculate the end price. In more detail, in the advanced case, the following information is required:

The price type, which is the average, highest or lowest price of the observed price (market) values.
The observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the highest or lowest pricing cases, the observation frequency can also be continuous. In the continuous observation case, the highest or lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The price start date, which is either inputted or calculated. If inputted, the tool calculates the number of pricing observations from the start and end dates and the observation frequency.
The price end date.
The number of observations, which is either inputted or calculated. If inputted, the tool calculates the price start date from the number of observations, the price end date and the observation frequency. Note: In the continuous observation case, the number of observation days is used instead of the number of observations.

Note: If the plan has more than one price source (see below), the start and end prices are calculated for the underlying market for each price source, and the relative market performance is determined by comparing the end price to the start price for each market, and finding the average, best or worst of these comparisons. This should be taken into account when the relative market performance is mentioned below.

The fourth part of the information required for the historical performance calculations is the maturity positive return data, which is used to determine the additional return (growth) that will be received at maturity (additional to the minimum return described above). If the plan does not require this option, it can be switched off.

There are three basic types of maturity positive return data. The first type is a call return, which requires the following information:

The call strike. If the relative market performance, comparing the calculated end price to the calculated start price, is better than the call strike, then an additional return will be received at maturity, e.g. if the call strike is 100%, then any increase in price will lead to an extra return. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The call gearing. If the call strike is exceeded, the gearing provides the multiplying factor on the performance gain to determine how much additional return is received, e.g. if the call strike is 100% and the gearing is 200% then any price increase is multiplied by 2 when calculating the return. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

The second positive return type is a capped call return, which requires the following information:

The capped call strike. If the relative market performance, comparing the calculated end price to the calculated start price, is better than the call strike, then an additional return will be received at maturity, e.g. if the call strike is 100%, then any increase in price will lead to an extra return. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The capped call gearing. If the capped call strike is exceeded, the gearing provides the multiplying factor on the performance gain to determine how much additional return is received, e.g. if the call strike is 100% and the gearing is 150% then any price increase is multiplied by 1.5 when calculating the return. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
Either the cap strike or the return cap, with the other one being calculated:
- The cap strike, which specifies a maximum strike level on the relative market performance in the return calculation, with any further price increase being ignored, e.g. if the call strike is 100% and the cap strike is 150% but the calculated end price is 75% higher than the calculated start price, only the first 50% of the performance gain is relevant. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
- The return cap, which specifies the maximum additional return that will be received at maturity, e.g. if the return cap is 50%, this is the maximum even if the calculated return from the call strike and gearing would exceed this. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

The third positive return type is a digital return, which requires the following information:

The digital strike. If the relative market performance, comparing the calculated end price to the calculated start price, is better than the digital strike, then an additional fixed return will be received at maturity, e.g. if the digital strike is 100%, then any increase in price will lead to the same fixed return. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The digital return, which specifies the additional fixed return that will be received if the digital strike is exceeded, e.g. if the digital return is 42% and the digital strike is 100%, then any increase in price will lead to a 42% return. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

In addition to, or in place of, the above positive return types, a plan may have a periodic growth builder. This is a mechanism that on a periodic basis gives a locked-in return if the required condition is met, with the total of the individual returns being received at maturity. If a periodic growth builder is part of the plan, select it and enter the following information:

The periodic return, which is the return that is locked-in per period if the return condition is met. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The number of return dates, which specifies the number of dates when a possible return is checked for. Multiplying this by the periodic return gives the maximum possible growth builder return.
The return frequency, which is either annual or monthly.
The return condition level, which is the relative performance level that must be exceeded for the return to be given at a date, with the relative performance being determined by comparing the return observation price to the plan start price, e.g. if the condition level is 100% then the return will be given as long as the observed price is greater than the start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The return condition observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly, yearly or continuous, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all the non-continuous types, the closing value of the market (or markets) is obtained for each observation. In the continuous observation case, the highest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The number of observations for determining the observation price, or the number of observation days if the observation frequency type is continuous. This is the same for every possible return date.
The first return observation end date, which, in combination with the number of observations and the observation frequency, is used by the tool to calculate the first return observation start date and period. The first return observation end date is also used, together with the number of return dates and the return frequency, to calculate all the other return observation end dates. Note: If the required observation day of the year or month is not a week day for the first return observation end date, enter it as the required date anyway, to prevent all the other dates being calculated from the wrong date, e.g. if the observation end date should be on September 18th of each year starting from 2011, enter the first date as September 18th (Sunday) and not the 19th (Monday). The tool will handle any dates that don't fall on a week day by shifting them automatically to the next business day, e.g. September 19th 2011 for the first one.
The last return observation end date, which is calculated from the first return observation end date but, unlike the other return observation end dates, is also editable.

Finally, in the maturity positive return data part, it is possible to specify up to 5 lock-in levels. A lock-in level is required if it is possible to lock-in any observed growth during the course of plan to specify a minimum on the additional return calculated at maturity. For each required lock-in, it is necessary to provide the following information:

The lock-in level, which is the relative performance level that must be exceeded during the observation period for the lock-in to be applicable, with the relative performance being determined by comparing the lock-in observation price to the plan start price, e.g. if the lock-in level is 114% then the lock-in will be applicable if the observed price is more than 14% higher than the start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The lock-in minimum return, which if the lock-in level is exceeded, gives a minimum additional return that will be received at maturity. This often matches the lock-in level, e.g. 14% with a lock-in level of 114%, but not always, which is the reason it can be specified separately. This return is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The lock-in observation type, which is the average, highest or lowest of the observed market values.
The lock-in observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the highest or lowest observation type cases, the observation frequency can also be continuous. In the continuous observation case, the highest or lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The lock-in observation start date, which is either inputted or calculated. If inputted, the tool calculates the number of observations from the observation start and end dates and the observation frequency.
The lock-in observation end date.
The number of lock-in observations, which is either inputted or calculated. If inputted, the tool calculates the observation start date from the number of observations, the observation end date and the observation frequency. Note: In the continuous observation case, the number of observation days is used instead of the number of observations.

The fifth part of the information required for the historical performance calculations is the maturity negative return data, which is used to determine any reduction in the return (risk) that will be received at maturity (reduced from the base return described above).

There are three basic types of negative return data. The first type is a put return, which requires the following information:

The put strike. If the relative market performance, comparing the calculated end price to the calculated start price, is less than the put strike, then the return received at maturity will be reduced, e.g. if the put strike is 100%, then any decrease in price will lead to a return reduction. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The put gearing. If the put strike is breached, the gearing provides the multiplying factor on the performance loss to determine how much reduction there is on the return received, e.g. if the put strike is 100% and the gearing is -200% then any price decrease is multiplied by 2 when calculating the return reduction. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

The second negative return type is a floored put return, which requires the following information:

The floored put strike. If the relative market performance, comparing the calculated end price to the calculated start price, is less than the put strike, then the return received at maturity will be reduced, e.g. if the put strike is 100%, then any decrease in price will lead to a return reduction. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The floored put gearing. If the floored put strike is breached, the gearing provides the multiplying factor on the performance loss to determine how much reduction there is on the return received, e.g. if the put strike is 100% and the gearing is -200% then any price decrease is multiplied by 2 when calculating the return reduction. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
Either the floor strike or the return floor, with the other one being calculated:
- The floor strike, which specifies a minimum strike level on the relative market performance in the return reduction calculation, with any further price decrease being ignored, e.g. if the put strike is 100% and the floor strike is 50% but the calculated end price is 75% lower than the calculated start price, only the first 50% of the performance loss is relevant. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
- The return floor, which specifies the maximum reduction in the return that will be received at maturity, e.g. if the return floor is -50%, this is the maximum reduction even if the calculated return reduction from the put strike and gearing would exceed this. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

The third negative return type is a digital return, which requires the following information:

The digital strike. If the relative market performance, comparing the calculated end price to the calculated start price, is less than the digital strike, then there will be a fixed reduction in the return received at maturity, e.g. if the digital strike is 100%, then any decrease in price will lead to the same fixed return reduction. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The digital return, which specifies the fixed reduction in the return that will be received if the digital strike is breached, e.g. if the digital return is -42% and the digital strike is 100%, then any decrease in price will lead to a 42% return reduction. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

In all negative return cases, it is possible to specify a negative removal level, which is a level that if exceeded during the specified observation period, removes any negative return factor from the overall return calculation and thus cancels any possible reduction in the return that will be received at maturity. This negative removal option requires the following information:

The removal level, which is the relative performance level that when exceeded during the removal observation period, removes any negative return factor permanently, with the relative performance being determined by comparing the removal observation price to the plan start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The removal observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly, yearly or continuous, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all the non-continuous types, the closing value of the market (or markets) is obtained for each observation. In the continuous observation case, the highest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The removal observation start date, which is either inputted or calculated. If inputted, the tool calculates the number of observations from the observation start and end dates and the observation frequency.
The removal observation end date.
The number of observations, which is either inputted or calculated. If inputted, the tool calculates the observation start date from the number of observations, the observation end date and the observation frequency. Note: In the continuous observation case, the number of observation days is used instead of the number of observations.

Finally, in the maturity negative return data part, it is possible to specify negative return protection, which prevents any negative return factor being applied, and thus protects the maturity return from any possible reduction, unless the condition to remove the protection is breached. There are two types of negative return protection:

The first type is soft protection, which requires the following information:

The protection level, which is the relative performance level that when breached during the protection observation period, removes any negative return protection, with the result that the negative return factor, and thus any calculated maturity return reduction, applies. For this level, the relative performance is determined by comparing the protection observation price to the plan start price, e.g. if the protection level is 50% then the protection will be removed if the observed price is more than 50% lower than the start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The protection observation type, which is the lowest or average of the observed market values.
The protection observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the lowest observation type case, the observation frequency can also be continuous. In the continuous observation case, the lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The protection observation start date, which is either inputted or calculated. If inputted, the tool calculates the number of observations from the observation start and end dates and the observation frequency.
The protection observation end date.
The number of observations, which is either inputted or calculated. If inputted, the tool calculates the observation start date from the number of observations, the observation end date and the observation frequency. Note: In the continuous observation case, the number of observation days is used instead of the number of observations.

The second type is hard protection, which requires the following information:

The protection level, which is the performance level that if breached at maturity, removes any negative return protection, with the result that the negative return factor, and thus any calculated maturity return reduction, applies. For this level, the relative performance is determined by comparing the plan end price to the plan start price, e.g. if the protection level is 50% then the protection will be removed if the end price is more than 50% lower than the start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

The sixth part of the information required for the historical performance calculations is the product income data, which specifies the income payment dates and amounts for the plan, together with the conditions that enable or prevent payments being made. The standard income data that is required is as follows:

The first income payment date, which is the date on which the first income payment is made, as long as any specified conditions are met. The first date is used, together with the number of payment dates and the payment frequency, to calculate all the other income payment dates. Note: If the required payment day of the year or month is not a week day for the first payment date, enter it as the required date anyway, to prevent all the other dates being calculated from the wrong date, e.g. if the payment date should be on September 18th of each year starting from 2011, enter the first date as September 18th (Sunday) and not the 19th (Monday). The tool will handle any dates that don't fall on a week day by shifting them automatically to the next business day, e.g. September 19th 2011 for the first one.
The number of payment dates, noting that some payments may not be made if conditions are not met.
The payment frequency, which is annual, semiannual, quarterly or monthly.
The last income payment date, which is calculated from the first income payment date but, unlike the other payment dates, is also editable.
The income start rate. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The income growth rate, in annual rate terms. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

If payments should be stopped if a barrier is breached, then the payment stop barrier should be set to Yes and the following information specified:

The barrier level, which is the relative performance level that when breached during the barrier observation period, causes income payments to be stopped, either permanently or until the restart condition is met. For this level, the relative performance is determined by comparing the barrier observation price to the plan start price, e.g. if the barrier level is 50% then the payments will be stopped if the observed price is more than 50% lower than the start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The barrier observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly, yearly or continuous, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all the non-continuous types, the closing value of the market (or markets) is obtained for each observation. In the continuous observation case, the lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The barrier observation start date, which is either inputted or calculated. If inputted, the tool calculates the number of observations from the observation start and end dates and the observation frequency.
The barrier observation end date.
The number of observations, which is either inputted or calculated. If inputted, the tool calculates the observation start date from the number of observations, the observation end date and the observation frequency. Note: In the continuous observation case, the number of observation days is used instead of the number of observations.

If payments that are stopped due to a barrier breach can be restarted, then it is necessary to enter the payment restart condition information:

The payment restart level, which is the relative performance level that when exceeded during the restart observation period, causes stopped income payments to be restarted. For this level, the relative performance is determined by comparing the restart observation price to the plan start price, e.g. if the restart level is 100% then the payments will be restarted if the observed price is more than the start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The restart observation type, which is the average, highest or lowest of the observed market values.
The restart observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the highest or lowest observation type cases, the observation frequency can also be continuous. In the continuous observation case, the highest or lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The number of observations for determining the observation price, or the number of observation days if the observation frequency type is continuous. Since the restart condition is checked (when payments have been stopped) for each payment this observation number applies per payment.
The first payment restart observation end date, which, in combination with the number of observations and the observation frequency, is used by the tool to calculate the first payment restart observation start date and period. The first payment restart observation end date is also used, together with the number of payment dates and the payment frequency, to calculate all the other payment restart observation end dates. Note: If the required observation day of the year or month is not a week day for the first restart observation end date, enter it as the required date anyway, to prevent all the other dates being calculated from the wrong date, e.g. if the observation end date should be on September 18th of each year starting from 2011, enter the first date as September 18th (Sunday) and not the 19th (Monday). The tool will handle any dates that don't fall on a week day by shifting them automatically to the next business day, e.g. September 19th 2011 for the first one.
The last payment restart observation end date, which is calculated from the first payment restart observation end date but, unlike the other payment restart observation end dates, is also editable.
A flag to indicate whether stopped payments can be rolled over or not. If yes, then payments that cannot be made due to the payment stop barrier being breached are paid out if a restart condition is met for a future payment. If no, then any payments that cannot be made are lost even if a future payment restart is possible.

If payments can only be made if a condition is met, then the payment condition flag should be set to Yes and the following information specified:

The payment condition level, which can either be a single value or a value range, expressed as a:b where a and b are the boundary points of the range. In the former case, it is the relative performance level that when exceeded during the observation period for a payment, allows that payment to be made. In the latter case, the payment can be made if the relative performance level does not fall outside the range boundaries during the observation period for a payment. For this level, the relative performance is determined by comparing the payment observation price to the plan start price, e.g. if the condition level has a single value of 100% then the payment will be made if the observed price is more than the start price. Note: If the condition is not met, the payment is lost unless it can be rolled over into a future payment. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The payment condition observation type, which is the average, highest or lowest of the observed market values. When the payment condition level is a value range, the condition observation type can also be always in range, which should be chosen if the lowest and highest observed market values (and thus any observed value) should not fall outside the range for the condition to be met.
The payment condition observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the highest or lowest observation type cases, the observation frequency can also be continuous. In the continuous observation case, the highest or lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The number of observations for determining the observation price, or the number of observation days if the observation frequency type is continuous. Since the payment condition is checked for each payment this observation number applies per payment.
The first payment condition observation end date, which, in combination with the number of observations and the observation frequency, is used by the tool to calculate the first payment condition observation start date and period. The first payment condition observation end date is also used, together with the number of payment dates and the payment frequency, to calculate all the other payment condition observation end dates. Note: If the required observation day of the year or month is not a week day for the first condition observation end date, enter it as the required date anyway, to prevent all the other dates being calculated from the wrong date, e.g. if the observation end date should be on September 18th of each year starting from 2011, enter the first date as September 18th (Sunday) and not the 19th (Monday). The tool will handle any dates that don't fall on a week day by shifting them automatically to the next business day, e.g. September 19th 2011 for the first one.
The last payment condition observation end date, which is calculated from the first payment condition observation end date but, unlike the other payment condition observation end dates, is also editable.
A flag to indicate whether missed payments can be rolled over or not. If yes, then payments that cannot be made due to the payment condition not being met are paid out if a condition is met for a future payment. If no, then any payments that cannot be made are lost.

If payment income can be locked-in if a condition is met, i.e. the current and all future payments are guaranteed irrespective of any barrier breach or payment condition failure, then the payment lock-in condition flag should be set to Yes and the following information specified:

The payment lock-in level, which is the relative performance level that when exceeded during the observation period for a payment, locks-in that payment and all future payments, allowing them to be made. For this level, the relative performance is determined by comparing the payment observation price to the plan start price, e.g. if the condition level is 120% then the payment lock-in will be applicable if the observed price is more than 20% higher than the start price. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The payment lock-in observation type, which is the average, highest or lowest of the observed market values.
The payment lock-in observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the highest or lowest observation type cases, the observation frequency can also be continuous. In the continuous observation case, the highest or lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The number of observations for determining the observation price, or the number of observation days if the observation frequency type is continuous. Since the payment lock-in condition is checked for each payment this observation number applies per payment.
The first payment lock-in observation end date, which, in combination with the number of observations and the observation frequency, is used by the tool to calculate the first payment lock-in observation start date and period. The first payment lock-in observation end date is also used, together with the number of payment dates and the payment frequency, to calculate all the other payment lock-in observation end dates. Note: If the required observation day of the year or month is not a week day for the first lock-in observation end date, enter it as the required date anyway, to prevent all the other dates being calculated from the wrong date, e.g. if the observation end date should be on September 18th of each year starting from 2011, enter the first date as September 18th (Sunday) and not the 19th (Monday). The tool will handle any dates that don't fall on a week day by shifting them automatically to the next business day, e.g. September 19th 2011 for the first one.
The last payment lock-in observation end date, which is calculated from the first payment lock-in observation end date but, unlike the other payment lock-in observation end dates, is also editable.

If bonus income payments are payable on bonus conditions being met, then the bonus income flag should be set to Yes and the following information specified:

The first bonus payment date, which can differ from the first income payment date, and is the date on which the first bonus payment is made, as long as the specified condition is met. The first date is used, together with the number of bonus payment dates and the bonus payment frequency, to calculate all the other bonus payment dates. Note: If the required payment day of the year or month is not a week day for the first payment date, enter it as the required date anyway, to prevent all the other dates being calculated from the wrong date, e.g. if the payment date should be on September 18th of each year starting from 2011, enter the first date as September 18th (Sunday) and not the 19th (Monday). The tool will handle any dates that don't fall on a week day by shifting them automatically to the next business day, e.g. September 19th 2011 for the first one.
The number of bonus payment dates, noting that some bonus payments may not be made if conditions are not met.
The bonus payment frequency, which is annual, semiannual, quarterly or monthly.
The last bonus payment date, which is calculated from the first bonus payment date but, unlike the other payment dates, is also editable.
The bonus income rate, which is constant over the lifetime of the plan, i.e. the bonus income rate cannot grow. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The bonus payment condition level, which can either be a single value or a value range, expressed as a:b where a and b are the boundary points of the range. In the former case, it is the relative performance level that when exceeded during the observation period for a bonus payment, allows that payment to be made. In the latter case, the bonus payment can be made if the relative performance level does not fall outside the range boundaries during the observation period for a payment. For this level, the relative performance is determined by comparing the bonus payment observation price to the plan start price, e.g. if the condition level has a single value of 100% then the payment will be made if the observed price is more than the start price. Note: If the condition is not met, the bonus payment is lost, i.e. it cannot be rolled over into a future payment. This level is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The bonus payment condition observation type, which is the average, highest or lowest of the observed market values. When the payment condition level is a value range, the condition observation type can also be always in range, which should be chosen if the lowest and highest observed market values (and thus any observed value) should not fall outside the range for the condition to be met.
The bonus payment condition observation frequency, which consists of two parts: a frequency number and a frequency type. The type is daily, weekly, monthly or yearly, with the frequency number indicating the type spacing, e.g. 3 daily specifies a frequency of every 3 days. For all these types, the closing value of the market (or markets) is obtained for each observation. In the highest or lowest observation type cases, the observation frequency can also be continuous. In the continuous observation case, the highest or lowest value of the market (or markets) over the observation range is found, which can be at any time during the day and not just at the close. Note: In the continuous case, the observation frequency number is not relevant.
The number of observations for determining the observation price, or the number of observation days if the observation frequency type is continuous. Since the bonus payment condition is checked for each payment this observation number applies per payment.
The first bonus payment condition observation end date, which, in combination with the number of observations and the observation frequency, is used by the tool to calculate the first bonus payment condition observation start date and period. The first bonus payment condition observation end date is also used, together with the number of bonus payment dates and the bonus payment frequency, to calculate all the other bonus payment condition observation end dates. Note: If the required observation day of the year or month is not a week day for the first condition observation end date, enter it as the required date anyway, to prevent all the other dates being calculated from the wrong date, e.g. if the observation end date should be on September 18th of each year starting from 2011, enter the first date as September 18th (Sunday) and not the 19th (Monday). The tool will handle any dates that don't fall on a week day by shifting them automatically to the next business day, e.g. September 19th 2011 for the first one.
The last bonus payment condition observation end date, which is calculated from the first bonus payment condition observation end date but, unlike the other payment condition observation end dates, is also editable.

The seventh part of the information required for the historical performance calculations is the price source data, which is used to specify the price source/underlying market(s) for the plan. If the product only has one underlying market (UK or US stock market), the basic price source can be used. Otherwise, the advanced option is required. In the advanced option, it is necessary to specify:

The underlying type, which is average, best or worst, and determines how the overall relative market performance is calculated from the relative market performance for each underlying market.
The underlying markets, noting that currently there is only a choice of 2 (UK or US stock market).

Note: In this tool, a level is only breached if the relative performance, depending on the direction, exceeds or falls below it, i.e. being equal to the level is not treated as a breach. If a particular product requires that the equals to case also counts as a level breach, there are a couple of options for handling this with the tool. The first option is to simply ignore it, as being equal to a level is an unlikely event and the effect on the overall results would thus be slight. The second option is to enter a level value that is a little bit smaller or bigger than the actual value and thus distinguish the products where being equal to a level counts as a breach from those where it does not, e.g. if the level is 100%, type in 99.999999% for the greater than or equals to case.

While not necessary for the historical performance calculations, it is also possible to attach the following additional product information to the plan by opening up the product information section:

The product provider.
The closing date of the plan.
Any additional product information.

As an addition to the full historical performance calculations, the tool also provides the possibility of running the plan data through a small number of historical tests, with an optional trace. This allows the calculations and logic used in the tool to be checked if required. To run the product in tester mode, open up the advanced options, switch the product test mode on and enter the following information:

The tester start date, which is the date at which the testing starts. This date must be after 01/01/1990.
The number of tests, which cannot be greater than 10.
Whether a trace file should be generated or not. If it should be generated, a link is provided in the browser to the trace file once the tests have been completed.

As mentioned at the beginning of this information page, a wide range of historical performance results are calculated and displayed:

The first start date for the historical performance test.
The last start date for the historical performance test.
The length of the historical performance test in years, i.e. the difference between the first and last start dates.
The number of times the plan is tested.
The average return over all the performance tests.
The average term in years over all the performance tests.
The average duration in years over all the performance tests. The duration calculated here is the Macaulay duration. In more detail, for every performance test, the present value of each returned amount (payment and maturity) is multiplied by its individual term, and these time-weighted values are summed up. This sum is then divided by the sum of all the present values to obtain the duration. As an extra point, the present values are determined using the AER calculated for the performance test.
The average return as an annualised value over all the performance tests.
The average AER (annual equivalent rate) over all the performance tests.
The median AER (annual equivalent rate) over all the performance tests.
The worst return over all the performance tests.
The frequency of this worst return during the performance tests.

In addition, a results table is also displayed showing the average AER and average return for the worst 0.1%, 1%, 5%, 10% and 25% of results. If any of the historical tests show losses, an additional column is included, giving the percentage of results which indicated losses and the average AER and return for these loss making tests.

In addition, a results table is also displayed showing the average AER and average return for the best 0.10%, 10-20%,..., 90-100% of results.

Furthermore, depending on the plan input data, some additional historical test results are calculated and displayed:

The frequency (percentage) of performance tests in which the maturity return is reduced, i.e. the percentage of tests which have a non-zero maturity negative return.
If the plan has negative return soft protection, the frequency (percentage) of performance tests in which this soft protection barrier is breached.
If payments should be stopped if a barrier is breached, the frequency (percentage) of performance tests in which this stop barrier is breached.
If stopped payments can be restarted, the frequency (percentage) of the performance tests in which a payment restart occurs.

Finally, for comparison purposes, the historical results of investing in the underlying stock markets over the plan period can be calculated and shown. Two inputs are required for this stock market investment comparison:

The annual expenses rate. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
The total investment spread. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

The stock market investment comparison results are split into three sections.

The first section shows the average return, average AER, median AER and worst return for each underlying market over all the historical tests.

The second section shows a table for each underlying market, displaying the average AER and average return for the worst 0.1%, 1%, 5%, 10% and 25% of results. If any of the historical investment tests show losses, an additional column is included, giving the percentage of results which indicated losses and the average AER and return for these loss making tests.

The third section shows the average AER and average return for the best 0.10%, 10-20%,..., 90-100% of results, for each underlying market.

Note: If you are using this tool with JavaScript disabled, it is necessary to press Calculate to open up a section for data entry after choosing the required option from a drop down, e.g. for entering advanced start price data or capped call return data.

Disclaimer: Historical performance is not necessarily a good guide to future performance. The historical data used in the calculation of the performance results has been compiled using a variety of sources and statistical techniques.

Associated tool link: http://www.coggit.com/tools/risky_income_plan.html