Ed Senior, manager of the Atlantic House Structured Products fund, explains how institutional structured investments' risk premiums can be monetised.
Mention the word ‘derivative’, or specifically ‘option’, and it is a 50:50 bet as to whether the person opposite you nods knowingly, or winces and asks you to change the topic. However, there is no getting away from the fact the derivatives market is a significant one, with traded volumes around the world extending to £875bn, daily (see chart below). Derivatives, whether being used as investment vehicles, or for hedging purposes, span pretty much every industry sector. Be it an insurance company or pension fund hedging its long-term interest rates liabilities, a large industrial corpo...
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