Difference between revisions of "Synthetic"

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m (Spacing and wiki listing 15/8/13)
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For example, a synthetic forward foreign exchange contract can be built from a simultaneous combination of:
 
For example, a synthetic forward foreign exchange contract can be built from a simultaneous combination of:
i. A spot foreign exchange contract.
+
 
ii. A borrowing in one of the currencies; and
+
# A spot foreign exchange contract.
iii. A deposit of equal maturity in the other currency.
+
# A borrowing in one of the currencies; and
 +
# A deposit of equal maturity in the other currency.
 +
 
  
 
== See also ==
 
== See also ==
 
* [[Arbitrage]]
 
* [[Arbitrage]]
 
* [[Foreign exchange forward contract]]
 
* [[Foreign exchange forward contract]]
 
 

Revision as of 13:05, 15 August 2013

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

For example, a synthetic forward foreign exchange contract can be built from a simultaneous combination of:

  1. A spot foreign exchange contract.
  2. A borrowing in one of the currencies; and
  3. A deposit of equal maturity in the other currency.


See also