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Any ideas about why they are calling these investments, "derivatives"? Capital markets aren't unfamiliar to this publication.
by joelhaus 16y ago
Any ideas about why they are calling these investments, "derivatives"? Capital markets aren't unfamiliar to this publication.
- btilly 16y agoBecause they are a type of derivatives. See http://en.wikipedia.org/wiki/Derivative_%28finance%29 http://en.wikipedia.org/wiki/Derivative_%28finance%29 for more on that. (Also my explanation at http://bentilly.blogspot.com/2009/10/what-are-financial-derivatives.html http://bentilly.blogspot.com/2009/10/what-are-financial-deri... has some interesting points.)
- joelhaus 16y agoStill not convinced that derivative is the correct way to describe this (assuming that billboebel's comment is accurate). I'd prefer if they called it securitization. It's possible that the funds offering statement lays out a clear goal, but also provides enough flexibility to employ some fancy engineering techniques. Then they raise funds and put the capital to work. Due to the illiquid nature of the target company, it wouldn't be surprising if the fund assets end up being a mix of synthetics, equity shares and employee stock options. Regardless, the article doesn't really provide enough information to draw a firm conclusion.