Hedging pipeline risk
Market view by Robert Benson
Retail providers that offer structured products are typically faced with having to manage so-called pipeline risk. This arises from the fact that the terms of the product have been fixed for the investor but the volume of final sales is unknown until the end of this period, while the price of the underlying assets used to hedge the product (i.e. the underlying derivatives) will vary.
Since the price of the derivatives will fluctuate, providers usually estimate the expected total sales in advance
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