I was searching on the products issued by the banks to retail investors, and saw some of the Dual Range Accruals having underlying as USD CMS 30Y - 2Y, and USD CMS 10Y, each having low barrier and high barrier respectively.
I understand it is quite obvious that we could think about the correlation and volatility since these two are the two most intuitive things that comes to mind when we think about the payoff condition of the Dual RA.
However it came to my mind that forward rates of USD CMS should also be the one that plays a significant factor. The spot rates of USD CMS 30y & 2y makes it feasible and reasonable for that spread to be an underlying having a lower barrier. However, when we think of the forward rate, it seems it has a very high possibility of reversal, which would be affected by the macro factors especially inflation rate and interest rate.
Is it just a simple rationale( for example, that's why long tenor would have higher coupon since it is exposed to more risk)? Or is there some other logics, especially in perspective of the traders, that would make these underlying seems feasible to be issued to investors?
Hope my question sounded clear. I really hope to share some personal opinions about this.
Thanks in advance.