Synthetic investment

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Synthetic Investment

A combination of investment vehicles that, when used together, can create a profit. An example is an option spread, where one takes two or more positions in option contracts in order to profit from the difference in their prices. Likewise, one may create a synthetic index in order to outperform a real index. Institutional investors are the main creators of synthetic investments.

Synthetic investment.

A synthetic investment simulates the return of an actual investment, but the return is actually created by using a combination of financial instruments, such as options contracts or an equity index and debt securities, rather than a single conventional investment.

For example, an investment firm might create a synthetic index that seeks to outperform a particular index by purchasing options contracts rather than the equities the actual index owns, and using the money it saves to buy cash equivalents or other debt securities to enhance its return on the derivatives.

Options spreads, structured products, and certain investments in real estate and guaranteed investment contracts can be described as synthetic products.

While they are artificial, they can play a legitimate role in an individual or institutional investor's portfolio as a way to reduce risk, increase diversification, enjoy a stronger return, or meet needs that conventional investments don't satisfy.

However, synthetic investments may carry added fees and add more complexity than you are comfortable dealing with.

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I consider synthetic securities to be another tool in the toolkit that we can use to seek incremental income while continuing to manage the volatility of the Fund.
77 trillion of securities and synthetic securities backed by mortgages of varying quality.
He represents issuers, underwriters, portfolio managers and trustees in a variety of transactions, including collateralised debt obligation transactions (CBOs and CLOs), structured investment vehicle transactions (SIVs), asset-backed CP conduit transactions, RMBS transactions, repackagings, credit-linked notes, synthetic securities, warehousings, accumulation swaps and hedging transactions.
In three sections covering fixed income securities, corporate debt markets, and structured financial products, he discusses the basics, forms of instruments, the yield curve, hybrid securities, callable and convertible bonds, the Eurobond market, warrants, preference shares and preferred stocks, mortgage and asset- backed securities, covered bonds, synthetic securities, collateralized debt obligations, index-linked derivatives, and relative value analysis.
and (viii) synthetic securities or instruments which are referenced to any of
This is accomplished either directly through the sale of assets oft the institution's balance sheet to the CDO, or by transferring the risk to the CDO through the use of synthetic securities.
It is an excellent summary of some of the main analytical considerations in explaining the origins and structure of securitization, how securitization adds value, the basic requirements for securitization, and how synthetic securities and related derivatives are created.
Additionally, Fitch accounted for the default of $20 million synthetic securities that had exposure to Lehman Brothers as a swap counterparty.
Monegy has specialized in managing credit risk for third party clients for more than a decade, with an active presence across high yield bonds, loans and synthetic securities.
For example, the portfolio might include bonds, loans or synthetic securities, corporate securities, structured finance securities, assets denominated in U.
Additionally, Fitch accounted for the default of $6 million synthetic securities that had exposure to Lehman Brothers as a swap counterparty.
The Company also opportunistically invests in distressed debt; debt and equity securities of public companies; credit default swaps; emerging market debt; and collateralized debt obligation vehicles holding debt, equity or synthetic securities.