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Untold Secrets of Structured Product Investing
Like Terry Pratchett, I would not want to drink a suspicious cocktail, the ingredients, and level of alcohol of which were unknown to me. Likewise, I wouldn’t want to invest my hard-earned money in some complicated investment product while understanding neither the purpose nor the risk profile of the investment. This is why I decided to write a guide that takes a deep dive into the world of structured product investing—to explain their purpose, construction rules, and risk and performance profiles. This is the book where you will find many of the untold secrets of structured products—secrets usually known only to the expert traders who construct these products. Just as you don’t need to know how to mix a martini to enjoy one, you don’t need to know any complex statistical formulas to get a great deal from this book. You should, of course, know that the likelihood for positive or negative returns is often described by probability distributions. For instance, you may want to keep in mind the plot of the bell-shaped Gaussian distribution. Payoff charts and illustrations of the probability distribution of returns are powerful concepts that we will use in this book to illustrate the performance and risk characteristics of structured products. Where I have introduced concepts, the first mention is in bold type, and you will find a full definition in the glossary.
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