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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This synthetic security is weak-linked to the underlying collateral, Toys "R" Us Inc.
A synthetic security is deemed a defaulted obligation where either the counterparty of the synthetic security is in default under the terms of the security, or the reference obligation of the synthetic security would be a deemed a defaulted security.
Those features, unveiled today, include synthetic security strips, a cotton-based paper used only for the bills, raised intaglio printing, watermarks and an iridescent hologram strip that will carry the denomination and the euro symbol.
31, 2007 the deal entered an Event of Default as a result of the sum of the net outstanding portfolio collateral balance and the balance of the short synthetic security reserve account totaling less then the sum of the commitment amount pus the aggregate outstanding amount of the class A-A1VF notes plus the aggregate outstanding amount of the class A1 notes.
The CreditWatch placement of the synthetic security reflects the negative CreditWatch placement of Toys "R" Us Inc.
Structural features include the synthetic security collateral account (SSCA) which will be drawn upon to make credit protection payments upon the occurrence of a credit event.
The result is a synthetic security that presents the characteristics uniquely sought by the investor.
The securities include custodial or trust receipts, auction rate receipts, inverse floating-rate receipts, and synthetic floating-rate receipts with put features, the most popular type of secondary market synthetic security.
The securities include custodial or trust receipts, auction-rate receipts, inverse floating-rate receipts, and synthetic floating-rate receipts with put features, the most popular type of secondary market synthetic security.
This synthetic security is weak-linked to the credit quality of the underlying securities, Toys "R" Us Inc.