A common design pays, say, a 9% annual coupon and observes quarterly. If the underlying is at or above its initial level on an observation date, the note redeems at par plus the accrued coupon. If not, it continues. At maturity, if the underlying has fallen below a barrier such as 60% of the start level, the investor takes the full downside.
The payoff is short volatility and short a deep out-of-the-money put. It wins repeatedly in flat and rising markets and loses substantially in a large decline, which is the classic profile of collecting small premiums against a rare large loss.
Reinvestment risk is structural: notes redeem early precisely when markets are strong and terms on new notes are less attractive, while the ones that survive are the ones performing badly. See barrier-option and reverse-convertible.
Related: barrier-option, reverse-convertible, structured-product, issuer-credit-risk, put-option, implied-volatility