What is the risk of investing in FX Targeted Accrual Redemption Note (FX-TARN) ?
An FX Tarn is a structured note whose coupons are calculated from a formula involving one or more fx rates, and whose maturity depends on the cumulative coupons received. For example , the coupon could be $4pct*(1-FX_0/FX_1)$ where $FX_0$ is the Yen/Usd at issuance and $FX_1$ is the Yen/Usd on a coupon date. The bond matures when the cumulative coupons received reaches 10%, say. If this never happens the bond matures after 10 years.
Thus, the risk in this case is that the dollar weakens, causing the coupons to be reduced , and the maturity extends. Thus, you own a low paying bond for 10years.