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Synthetic asset
       
 
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Synthetic asset

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Synthetic asset
A synthetic asset is a combination of Long and Short positions in financial instruments, which has the same Risk/reward profile as another instrument. For example, it is possible to replicate the payout and exposure of a Short futures Position by going Short European-style call options and Long European puts with identical strikes and expiries. Synthetic index options can be generated either through positions in the Underlying and futures contracts, or with a basket of vanilla options.

See also Replication, Static replication
Posted by  Privatebanking.com
 
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