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Reverse financial instrument
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| Unlike in traditional investments where maximum loss is 100% of invested capital and the gains sorta approach ∞, In reverse financial instruments the maximum gain for the buyer approaches infinity, the maximum loss for the seller approaches infinity as well which, combined with other factors, can cause the system to meltdown like happened in Iceland in the early 2000's. The maximum gain for the seller of the put approaches 100% of the put price which may be -50% or -70% or +200% or +300% etc. i.e. over or under of 100% of the current price It should be noted ans stressed by economists and ppls that reverse financial instruments provide the wide range of insurance facilities for businesses. |
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