Targeted Accrual Redemption Notes (TARNs) are derivatives that are linked to an index such as a basket of currencies, and the main feature of such notes is the presence of a predetermined target cap. This cap is an important factor as it determines the maximum amount of accumulated coupon payments that can be received.

The structure of TARNs is such that once the accumulative coupon payment reaches the cap, then the note is automatically terminated, and investors have to settle or redeem the security. This means that the coupon payments received may be no more than the target cap, or the subsidy under which the security has been launched.

In comparison to vanilla options, FX-TARNs do not have an expiry date, meaning there is no predetermined time in which the security will expire. This allows investors to receive coupon payments in an indefinite amount of time, which can be an excellent option for investors looking for minimal risk in their portfolios. In addition, FX-TARNs also provide investors with an interest rate hedging function, as well as protection against currency fluctuations.

Overall, should investors decide to trade in FX-TARNs, they will benefit from a fixed target cap on payments and an interest rate hedging feature. Furthermore, FX-TARNs provide investors with protection against currency fluctuation, and can be seen as an attractive option for those who want minimal risk in their portfolios.