A Risk- and Complexity- Rating Framework for Investment Products
Many investors who bought such investments as Lehman Brothers’ minibonds did not understand the products’ complicated features. This fact suggests that if the inherent risk and complexity of products’ structure are not clearly understood by investors, they will be unable to make informed decisions. Some practitioners have recently attempted to calibrate product complexity. The authors propose a framework for classifying investment product risk and complexity separately with a list of factors that contribute to these attributes. They demonstrate the framework’s simplicity and usefulness in helping investors make informed decisions, showing that it can be used to calibrate a variety of investment products.
Finance and Financial Management | Portfolio and Security Analysis
Quantitative Finance; Finance
Financial Analysts Journal
Chartered Financial Analysts Institute
KOH, Seng Kee Benedict; KOH, Cher Chiew Francis; LEE, David Kuo Chuen; Kian Guan LIM; NG, David; and PHOON, Kok Fai.
A Risk- and Complexity- Rating Framework for Investment Products. (2015). Financial Analysts Journal. 71, (6), 10-28. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4833
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