Participation notes are a form of derivative, issued by a counterparty such as a bank or a broker, which give an investor the same exposure as buying the underlying security would. For example, for an investor who isn’t allowed to hold shares in an Indian company directly, a bank or a broker can create a participatory note that has the same risks and rewards as holding the underlying share would EXCEPT that there is a risk that the bank or broker could go bust and the note become worthless.
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