Investment Banks Sell a Controversial Way to Hedge Volatility
- Reverse convertibles offer high yield and downside protection
- U.S. regulators have fined banks for improper product sales
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As the shadow of volatility looms, it’s out with simplicity, in with complexity.
A little-watched corner of the investment-product industry is offering money managers some refuge from jittery markets by combining bonds with exotic options. The security offers juicy yields and the prospect of better returns than vanilla equity investments if prices swing moderately.