Complexity Levels of Financial Instruments

The introduction of CRISIL Complexity Levels for capital market instruments is CRISIL's latest initiative in its continuing effort to educate market participants on complexity.


Instruments Simple Complex Highly Complex
Corporate Debt
Corporate Bond1 Fixed coupon Fixed coupon with features (say a put/call option)  
  Floating rate (Yield linked to benchmark)  
  Floating rate with features (say put/call option, floors/ caps)  
Others Commercial Paper    
Certificate of Deposit    
Fixed Deposit    
 
Derivatives
Exchange Traded Derivatives
Equity derivatives   Buying index/ stock options (Long position) Selling index/ stock options (Short position)
  Index/ stock futures (buying and selling)  
Commodity derivatives   Commodity futures  
Over The Counter (OTC) Derivatives
Foreign exchange derivatives   Simple single currency forward rate agreement without any features (cap, collar, knock in, knock outs etc.) Forward rate agreement with customised features
    Cross-currency forward rate agreements
    Currency options
    Currency swaps
Interest rate derivatives     Interest rate swaps
    Cross-currency interest rate swaps
Credit Derivatives   Credit Default Swaps - Protection buying - Single asset Credit Default Swaps - Protection selling - Single asset
    Credit Default Swaps - Multi asset (both buying and selling)
 
Equity
Equity shares Exchange traded equity shares    
 
Hybrid Instruments
Lower Tier 2 bonds by banks Fixed coupon Fixed coupon with features (say a put/call option)  
  Floating rate (Yield linked to benchmark) Floating rate with features (say put/call option, floors/ caps)
Hybrids issued by banks2     Perpetual innovative Tier 1 bonds
    Perpetual Preference shares
    Upper Tier 2 bonds
Preference Shares   Plain Vanilla  
  Convertible preference shares  
Convertible Bonds   Optionally (fully/ partially) convertible bonds Foreign currency convertible bonds (FCCB)
  Compulsory (fully/ partially) convertible bonds  
Others   Separate Trading of Registered Interest and Principal Securities (StrIPS) Security Receipts (issued by Asset Reconstruction Companies)
    Equity linked debentures
    Commodity linked debentures
 
Mutual Funds
Debt Funds Gilt funds Floating rate funds  
Liquid funds    
Debt funds    
Fixed maturity plans    
Interval Funds    
Monthly Income Plans    
Structured Mutual Funds   Capital protected fund - Static Hedge Capital protected fund - leveraged
  Arbitrage Funds CPPI (Constant Proportion Portfolio Insurance)
    DPI (Dynamic Portfolio Insurance)
Mutual funds - Equity and others Plain equity funds Derivative funds Art funds
Sector based funds Fund of funds  
Balanced funds International funds  
Gold funds Special situation funds  
Exchange traded funds    
Index linked mutual funds    
 
Others
  Public Provident Fund (PPF)  Unit Linked Insurance Plans Real Estate Investment Trusts (REIT)
National Savings Certificate/ Indra Vikas Patra / Kisan Vikas Patra    
Recurring Deposit    
 
Securitised Debt
Structured bonds   Bonds backed by escrow of identified cash flows such as water charges and property taxes  
  Bonds backed by guarantee Bonds backed by partial guarantee
Asset Backed Securities (ABS)/
Mortgage Backed Securities (MBS)/
Pass Through Certificates (PTCs)
  Fixed coupon - Prepayment protected Fixed coupon - Prepayment not protected
    Floating rate - (Both prepayment protected and not protected)
    MBS with reset of yields
    Repacked instruments backed by ABS/ MBS
Collateralised Debt Obligations (CDO)   Single Asset (Single loan sell downs) Multi Asset
Bonds structured for pool financing for Urban Local Bodies (ULBs)     Bonds structured for pool financing for ULBs

1 - Floating rate bond with features such as put/call option, floors/ caps has been re-classified as 'Complex' from earlier classification of 'Highly Complex'
2 - Upper Tier 2 bonds which were previously classified as 'Complex', have been re-classified as 'Highly Complex'