The bonus level is set above the current price of the underlying at the issue of the certificate. The barrier is set below the initial value. If the specific certificate comes with a cap as well, it is set at or above the bonus level.
The redemption at the end of maturity hinges on the development of the underlying. The following two cases can occur:
If the underlying asset never falls to or below the barrier level during the term of the certificate, the investor receives at least a payment equaling the bonus level. If the price of the underlying is higher than the bonus level at the end of period date, s/he receives the higher payment out of the two. If a maximum payout (a cap value) of the certificate has been set, the payout amount is limited by this cap value.
If the underlying does fall to or below the barrier at least once during the term of the certificate, there will be no bonus payment. The investor gets the performance of the underlying paid out at the end of maturity (limited by the cap, if any). Depending on whether the price of the underlying is below or above the issue price, the investor suffers a loss or makes a profit.