Sentences with phrase «via financial engineering»
Most people think volatility is just about options, however many investment strategies create the profile of a short option via financial engineering.
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Correlation risk: «The concept of diversification is the foundation of modern portfolio theory... The financial engineer... reduces the risk of a portfolio by combining anti-correlated assets... All modern portfolio theory does is transfer price risk into hidden short correlation risk... Many popular institutional investment strategies derive excess returns via implicit leveraged short correlation trades with hidden fragility... Correlation risk can be isolated and actively traded via options as source of excess returns.