7. Investment Profiles and Synthetic Annuities
Before continuing with the mechanics of model building, it might be helpful to provide some practical context for structured security investing. Chapter 7 is a reprint of Chapter 2 that originally appeared in Profiting with Synthetic Annuities: Option Strategies to Increase Yield and Control Portfolio Risk (Pearson Education, 2012).
Synthetic annuities are a form of structured security that combine options and management rules to customize the risk/return profile of investments. Options are used to create a synthetic risk-smoothing mechanism and annuity-like cash flows. The management rules are designed to mitigate risk and maximize income over the long term.
Because Profiting with Synthetic Annuities ...
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