Equity-Linked Note (ELN)

An equity-linked note (ELN) is an investment product that combines a fixed-income investment with additional potential returns that are tied to the performance of equities. Equity-linked notes are usually structured to return the initial investment with a variable interest portion that depends on the performance of the linked equity. ELNs can be structured in many different ways, but the vanilla version works like a strip bond combined with a call option on a specific security, a basket of securities or an index like the S&P 500 or DJIA. In the case of a note linked to an equity index, the security would typically be called an equity index-linked note.