Filter by Categories
Accounting
Banking

Derivatives




Synthetic


A customized, hybrid, and artificially created financial instrument which combines an underlying price on a cash position with the price of a financial derivative. In other words, a synthetic replicates the features (usually the price pattern) of another instrument using the combined features of a set of other assets. Synthetics may include synthetic call, synthetic put, synthetic stock, etc.

For example, an investor can create a synthetic call (or a protected long sale) by taking a long position in a stock, buying at the same time a put option on that stock, and lending the present value of the call’s strike price in accordance with the put-call parity relationship.



ABC
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*