A PRDC coupon rate is set by multiplying the foreign coupon rate by the ratio of the payment-date exchange rate to a reference rate and subtracting the yen coupon rate. In the standard form, the coupon grows by the amount the exchange rate is above a certain level (a value corresponding to the strike price) and is zero at or below that level. With a floor of zero and no cap, it has the same shape as a series of long call options on the exchange rate, one for each payment date. Maturity can be 30 years or more, and knockout, early cancellation, and target-redemption conditions are often attached.
A PRDC embedded in a bond is called a PRD note.