Deriving derivatives

Andrei Soklakov shows how to incorporate traditional investment ideas and clients’ views into structured product design

In quantitative structuring, financial products are derived as solutions to clients'needs (Soklakov 2015a). This is very different from the historical approach where the precise structure of most financial products is best described as ad hoc: intuition-based solutions, inspired, rather than determined, by clients' needs.

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Although we argue for greater use of quantitative methods, the historical approach remains enormously relevant. Indeed, it contains a huge amount of