Special Reports » OTHER REPORTS » EQUITY DERIVATIVES

— Christian Kwek, BNP Paribas

Equity derivatives have made massive progress in traditionally untapped markets partly due to institutions having to reduce their equity allocations but not wanting to. Gerry O’Kane charts the rise of the asset class and provides an insight into the different types of products on offer.

— David Aldrich,Bank of New York

Hedge funds can be considered the alcoholics of the derivatives world – dependent on them to function in any meaningful way.

They have also been known to collapse when they’ve either over-indulged their passion or misjudged the effects of the product.

Guillaume Picot puts forward the case for hybrid products, which offer diversification and de-correlation to reduce average volatility and optimise potential returns arising from market cycles.

Underlyings

Given the tradition for equities and bonds in the standard investor’s portfolio, it is of no surprise that they are usually taken as primary underlyings for hybrids, their returns hedged, boosted, diversified or otherwise acted upon by the other asset classes.

Strategic investment

A further reason that an investor might wish to consider a hybrid product would be to allow an investor to capture an economic view that involves the behaviour of more than one asset class, in order to enhance or protect a standard return.