Trade of the month: Correlation

Trade of the month: Correlation

(see part one here)

The distinction between basket and multi-asset products is important. Baskets are popular because investors can choose any group of underlying assets and overlay an appropriate risk profile using a given structure such as principal protection, autocallable or income generation. The choice of components is important and affects the pricing parameters, but performance is a function of the basket return, which is usually a weighted average of the stock performances.

Examples of

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