A synthetic bond is a
synthetic position
In finance, a synthetic position is a way to create the payoff of a financial instrument using other financial instruments.
A synthetic position can be created by buying or selling the underlying financial instruments and/or derivatives.
If s ...
made up of a mixture of investments designed to mimic the
cash flow
A cash flow is a real or virtual movement of money:
*a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...
and risk profile of a
corporate bond
A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M&A, or to expand business. The term is usually applied to longer-term debt instruments, with maturity o ...
. A synthetic bond can contain items such as:
bond puts, bond calls, bond futures,
Treasuries
A treasury is either
*A government department related to finance and taxation, a finance ministry.
*A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure o ...
,
money market
The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less.
As short-term securities became a commodity, the money market became a compon ...
securities, and
credit default swap
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event. That is, the seller of the CDS insures the buyer against som ...
s'.
{{Derivatives market
Bonds (finance)
Derivatives (finance)