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Alex C
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PRDC FX: PRDC (Power Reverse Dual-Currency Notes): key risks and callability

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PRDC FX: key risks and callability

Can anyone tell me more about PRDC products. I've heard it is a popular product among Japanese investors. One popular product is the 10Y BRL/JPY paying a coupon of 20%*PerfFX-15% with callable options for the bank. I am a bit confused about the sensitivities (fx and rates), from my understanding the client thinks the BRLJPY forward is too low so he is long the forward => short BRL rate and long JPY rate. Correct? What about the correlation between fx spot and rates? It is confusing for me. Also, every year the bank can call the product. How does the trader decide if he should call it back or not? Thanks for your help