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Risky Derivatives Make Return For Returns' Sake

Thursday, May 30, 2013 - 7:09 AM
Investors facing record low bond yields are increasingly chasing higher returns via complex derivatives, the instruments at the root of the 2008 global financial crisis, which can punch yawning holes in balance sheets if they go awry.

Monetary stimulus from central banks has driven down sovereign and corporate bond yields and sent shares to multi-year highs, which in turn has encouraged investors to buy structured products that bundle derivatives with stocks or bonds to increase returns.

"The low interest rate environment is pushing clients to search for yield," said Sébastien Gyger, head of portfolio management for private clients at Lombard Odier.
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