what is an equity linked security elks 
equity linked securities resemble both stocks and bonds so although they may be debt securities equity linked securities provide returns that are tied to some form of underlying equity hence the name this equity is normally a common stock this means the returns are linked to the upward and downward movements of the underlying stock elks normally mature within a one year period the yield they pay is normally higher than that of the underlying security they also make two payouts or distributions to investors before they mature which is why investors prefer these kinds of investments equity linked securities normally mature within one year understanding equity linked security elks an equity linked security offering provides corporations with an alternative way to structure interest payments to investors an issuer can base security interest payments on a range of equity market products including a stock a group of stocks or an equity index they may also cap or pay a specified portion of the benchmark s return a standard equity linked security structured as a bond would offer variable interest payments tied to an equity benchmark and the return of principal at maturity elks offer a controlled interest rate product for the issuer types of equity linked securitiesinvestors may be offered the opportunity to invest in elks from a few different issuers they may also find elks advertised as market linked the following are a few kinds of elks that are available on the market corporations typically work with investment banks for support to structure equity linked security offerings for capital financing the royal bank of canada rbc is a leading source of structured finance equity linked securities rbc works with companies to structure equity linked security offerings with various types of provisions retail investors may see equity linked security offerings from a bank alongside certificates of deposit an equity linked security can be any type of investment with interest payments tied to an equity benchmark us bank advertises equity linked cds as one component of their market linked cd offering the interest on the cds is linked to an equity index the minimum investment is 4 000 securities with payments linked to a market benchmark are offered across the investment industry a market linked security can have payments linked to any type of market benchmark an issuer could structure a market linked security to make payments based on an equity benchmark they can also use any other market benchmark such as gold or currency for the security issuer market linked products offer the opportunity to control the payment to the investor by choosing a specified benchmark for investors they can offer an easy alternative to investing in the benchmark itself an investor in a gold linked cd would generally seek to earn the same rate of return as gold issuers can structure market linked products in numerous ways market linked products are also known to be illiquid and not tradable or redeemable without penalty during the duration of the investment 1