Synergy and Synthetic: Difference between pages

Revision as of 12:26, 13 November 2015

A synthetic financial instrument is a combination of two or more instruments, designed to replicate the cashflows from another instrument.

Example 1

A synthetic two-year deposit can be built from a simultaneous combination of:

A one-year deposit to start today and
A forward contract to re-deposit the maturing proceeds after one year, at a pre-agreed rate for the second year.

Example 2

A synthetic forward foreign exchange contract can be built from a simultaneous combination of:

@@ Line 1: / Line 1: @@
-#Any potential cost saving or revenue improvement, expected to result from the combination of one or more previously separate business activities.
+A synthetic financial instrument is a combination of two or more instruments, designed to replicate the cashflows from another instrument.
-#A cost saving resulting from reducing the numbers of staff in the combined entity.  For example, the closure of one head office, following the merger of two previously independent companies.
-[[Category:Corporate_finance]]
-[[Category:Corporate_finance]]
+'''Example 1'''
+A synthetic two-year deposit can be built from a simultaneous combination of:
+# A one-year deposit to start today and
+# A forward contract to re-deposit the maturing proceeds after one year, at a pre-agreed rate for the second year.
+'''Example 2'''
+A synthetic forward foreign exchange contract can be built from a simultaneous combination of:
+# A spot foreign exchange contract
+# A borrowing in one of the currencies and
+# A deposit of equal maturity in the other currency.
+== See also ==
+* [[Outright]]
+* [[Arbitrage]]
+* [[Foreign exchange forward contract]]