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Customized hybrid instruments created by blending an underlying price on a cash instrument with the price of a derivative instrument. It is a combination of security holdings that mimics the price movement of another single security (i.e., synthetic call: long position in a stock combined with a put on that position; a protected long sale; synthetic put: short position in a stock combined with a call on that position; a protected short sale).
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.