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Derivatives

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  • October 12, 2022
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Synthetic Asset

A combination of long and short positions in financial instruments, in order to mimic the the risk/ reward profile of another instrument. For example, a synthetic asset could be generated by replicating the payout and exposure of a short futures position by going short European-style call options and long European puts with identical strikes and expiration dates. Also, synthetic index options can be created either through positions in the underlying and futures contracts, or with a basket of vanilla options.


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