Questions on securities

Monday - Friday 09:00-17:00

Quick guide

Choose your country

Tutorial: Discount-certificates

What are discount certificates?

Discount certificate are debentures through which the investor acquires an underlying instrument at a discount to the direct investment. At the beginning of the term a cap is set which limits the potential return. At the end of maturity the current price of the underlying instrument is paid out, with the cap representing the upper limit of the payout.

This is the advantage of discount certificates – since the buyer of a discount certificate buys the share at a discount to its current price but gets the full share price (limited by the cap) paid out at the end of maturity, s/he can earn the so-called sideways yield. Please keep in mind the respective exchange ratio.

How do discount certificates work?

The potential return from discount certificates is capped. In return for this cap (and thus, for the unlimited potential return), the investor gets to buy the specific underlying at a discount. This means that you pay a lower price for the discount certificate than you would pay for investing directly in the underlying. At the end of maturity the current price of the underlying instrument is paid out (while bearing in mind the exchange ratio), with the cap representing the upper limit of the payout. The cap is set at the beginning of the term, remains constant over time, and marks the maximum return potential.

Your benefits

Discount certificates bring a little more safety to your portfolio. The discount at the time of acquisition means that you have a safety cushion and can make attractive profits even if markets do not move. This is the so-called sideways yield: the underlying has not moved, but you are still making a profit.

Your advantages

  • You may achieve a positive return at the end of maturity even if the underlying comes out below the initial price (sideways yield).
  • The difference between the price of the underlying and your initial acquisition price serves as cushion against losses.
  • Short maturities minimise your risk further and allow you to change your investment strategy in the medium run.

Details you should be aware of

  • With a discount certificates, your potential return is capped.
  • If the underlying falls, you may incur losses.
  • Between issue date and maturity, price fluctuations are possible, which means that the sale of the discount certificates prior to maturity may result in a loss.

How do discount certificates react to…

… rising markets?
In rising markets the discount certificate tends to rise as well, with the cap marking the maximum possible return. This means that in the case of rising markets, the discount certificate gradually approaches its cap.

… stable markets?
In stable markets, discount certificates rise over the course of time while approaching the end of maturity. This happens because the discount of the certificate decreases until the end of maturity, at which point the price of the certificate equals the price of the underlying. This is a prime example of the sideways yield.

… falling markets?
In falling markets, the certificates fall as well. However, since the discount certificate was bought at a discount to the underlying, the loss is lower by the amount of the discount then it would be for the underlying.



We use cookies and web analysis software to give you the best possible experience on our website. If you consent, these tools will be used. For more details please read our Data protection policy.


Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).

The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.

Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended). For this reason, the distribution or redistribution of the information, materials and products into United States or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited. The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.

The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.

By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.