Clearing, Settlement and Custody

Using derivatives in investment management

Introduction

There are numerous ways in which derivative products are used in

investment decisions. The house style, conditions, objectives and

relevance to the business requirement determine strategies and

product selection. Other key issues include liquidity, counterparty

risk, and the regulatory environment. In this section we look at some

basic examples of different ways of using derivatives.

Insight

Basic illustration of derivatives use in asset allocation

A fund manager has a portfolio made up of equity shares in the

USA and the UK, gilt stocks and cash. The current ratio is 40%

of the fund is invested in ...