Remarks at the Harvard Law School's Symposium on Building the Financial System of the 21st Century, Armonk, New York.

Remarks at the Harvard Law School's Symposium on Building the Financial System of the 21st Century, Armonk, New York.

Unlike standard derivatives instruments, correlation products contain nonseparable risk, meaning that the price sensitivity of one risk factor is a function of the level of another risk factor. This article outlines the pricing and hedging of one type of correlation product, the differential...