In This Chapter
Options are contracts based on prices. They aren’t securities on an underlying item itself. They are based on the value of the underlying asset. If you have access to the value of the asset, do you need to own the underlying asset, too? This is the question behind options and other derivatives.
If we reduce assets to their payouts, then we can approach them in a different way. We can find ways to replicate the value, possibly at a lower cost.
A synthetic security ...