, Columnist
Senate Literary Critics Don't Like Fictional Derivatives
Of course "fictional derivatives" are not really all that different from, you know, derivatives.
Today, the Senate's Permanent Subcommittee on Investigations is holding hearings about how some hedge funds, led by Renaissance Technologies, and with the assistance of some banks like Barclays and Deutsche Bank, may have evaded some $6 billion in taxes by using basket options. Fine. But the first thing to do about Renaissance Technologies' use of basket options to reduce taxes is to admire it aesthetically. It is so simple, yet so lovely. Here:
That's a neutral description; that's just a thing that happened. Renaissance put some money into a pot, its prime broker put a lot more money into the pot, Renaissance managed the pot, and later the prime broker got its money back and Renaissance had the upside and the risk.