TY - JOUR T1 - Synthetic Real Return Bonds JF - The Journal of Structured Finance SP - 59 LP - 63 DO - 10.3905/jsf.2013.19.2.059 VL - 19 IS - 2 AU - Jacques A. Schnabel Y1 - 2013/07/31 UR - https://pm-research.com/content/19/2/59.abstract N2 - This article proposes a new financial product—synthetic real return bonds. It demonstrates how a real return bond may be synthesized by developing an arbitrage relationship between such a bond and a portfolio composed of a nominal return bond, a set of inflation swaps, and a bank deposit and/or loan. Nominal return bonds issued by national governments may thus be transformed by a private-sector entity into real return bonds. Hence, the problems that render real return bonds problematic as investment and hedging vehicles, namely their scarcity and illiquidity, are ameliorated.TOPICS: Fixed income and structured finance, derivatives applications ER -