Nuclear Waste

In Wall Street parlance, it refers to the investments or instruments that involve risks requiring sophisticated mathematical skills to comprehend. Therefore, these investments/instruments would be often undervalued and, on rare occasions, overvalued. Rational investors would either buy or sell these investments (e.g. mortgage derivatives such as inverse IOs) in order to capture the yet unrealized value therein. For example, an investor may buy undervalued instruments and hedge their risks in other markets so that to skim the difference between the actual value and the undervalued price.