In part 1, we look at notions of kurtosis and skewness as proxies for risk, structured products provide a safe haven to investors, while direct investments on individual underlyings suit more risk seeking investors.
The concepts of skewness and (excess) kurtosis aim to distort conventional theories based on normal (or Gaussian) distribution - including option pricing and portfolio optimisation theories, which shed light on rational investor behaviour by considering expected returns against risk measures such as variance and standard deviation in the return distribution. Kurtosis of a return distribution looks at the probability of significant shifts away from existing security prices. For instance, positiv