A range note that is imbedded with a call option.

Derivatives | Quanto Callable Range Accrual Note

The embedded option allows the issuer to call the note on a specific date or a series of dates during its life. Therefore, the call option enables the investor to pocket a higher yield than what an ordinary note provides.

Investors find this structure attractive especially at times when implied volatility exceeds historical volatility.

The note will pay a higher coupon if the reference index breaks outside the range. Even if the issuer called the note on the first call date, the holder would have pocketed a higher coupon payment than the market.

Fixed Income Resources | Charles Schwab

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