Structured Note

A debt obligation that also contains an embedded derivative component with characteristics that adjust the security's risk/return profile. The return performance of a structured note will track that of the underlying debt obligation and the derivative embedded within it.

Investopedia Says:
A structured note is a hybrid security that attempts to change its profile by including additional modifying structures. A simple example would be a five-year bond tied together with an option contract for increasing the returns.

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1. Derivative instrument based on the movement of an underlying index, stock price, interest rate benchmark, or other financial asset. For example, a structured note issued by a corporation may pay interest to noteholders based on the rise and fall of oil prices. This gives investors the opportunity to earn interest and profit from the change in price of a commodity at the same time.

2. -complex debt instrument, usually a medium-term note, in which the issuer enters into one or more Swap arrangements to change the cash flows it is required to make. A simple form utilizing interest-rate swaps might be, for example, a three-year Floating Rate Note paying the London Interbank Offered Rate (LIBOR) plus a premium semiannually. The issuer arranges a swap transaction whereby it agrees to pay a fixed semiannual rate for three years in exchange for the LIBOR. Since the floating rate payments (cash flows) offset each other, the issuer has synthetically created a fixed-rate note.

Bond Derivatives of short-term duration whose principal or coupon value is determined by a market index. Market indexes that can be utilized include securities, commodity prices, and short-term bond rates.