What Is a Synthetic CDO? A synthetic CDO is a financial product that invests in non-cash assets such as swaps, options, and insurance contracts to obtain exposure to a portfolio of fixed-income assets. It is one kind of collateralized debt obligation (CDO). A CDO is a financial product structured by banks that pool and package
What Is a Synthetic Dividend? A synthetic dividend is an investment strategy in which investors use various financial instruments to create a stream of income mimicking that provided by dividend-paying companies. A common example of this strategy consists of selling covered call options against a portfolio of non-dividend-paying companies. In doing so, the investor would
What Is a Synthetic Lease? A synthetic lease is an off-the-balance sheet operating lease whereby a special purpose entity, established by the operating or parent company, purchases an asset and then leases it back to the operating company. The synthetic lease is popular among publicly traded companies that seek to improve debt to equity ratios
What Is a Synthetic Letter of Credit? A synthetic letter of credit (SLC) is a pre-funded, negotiable instrument that guarantees a specified payment will be rendered. Letters of credit can be structured in a variety of ways. Broadly, the different types of letters of credit can be grouped into two categories: funded and unfunded. Key
What Is a Systematic Manager? A systematic manager adjusts a portfolio’s long- and short-term positions on a particular security according to price trends. Systematic managers allow a security to remain part of the portfolio as long as the price of that security remains above a predetermined level. Key Takeaways A systematic manager is a type
What Is Systematic Risk? Systematic risk refers to the risk inherent to the entire market or market segment. Systematic risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market, not just a particular stock or industry. Key Takeaways Systematic risk is inherent to the market as a whole, reflecting the impact
What Is Systematic Sampling? Systematic sampling is a type of probability sampling method in which sample members from a larger population are selected according to a random starting point but with a fixed, periodic interval. This interval, called the sampling interval, is calculated by dividing the population size by the desired sample size. Despite the
What Is Survival Analysis? Survival analysis, also known as time-to-event analysis, is a branch of statistics that studies the amount of time it takes before a particular event of interest occurs. Insurance companies use survival analysis to predict the death of the insured and estimate other important factors such as policy cancellations, non-renewals, and how long it takes
What is Survivor Bond? A survivor bond is a type of fixed-income security in which future coupon payouts are based on the percentage of a defined population group who are alive on the stated payment dates. Key Takeaways Survivor bond is a a type of fixed-income security in which future coupon payouts are based on
What is Survivorship Bias Risk? Survivorship bias risk is the chance of an investor making a misguided investment decision based on published investment fund return data that reflects only successful funds rather than all funds. Key Takeaways Survivorship bias risk is the risk that the reported returns for investment funds is overly optimistic because failed
