any could tell the difference both start with # of future contracts based on risk free bond, then use the risk free bond income to pay the future when due. could understand this applied on synthetic index fund, but dont know how would this creates a cash equivalent liquidity for equitizing cash purpose tho…
i think the only difference is synthetic is long future and equitizing is short future.
thanks, but it seems short future when you creating cash from equity… whereas equitizing cash is to have equity exposure while maintain the liquidity.
equitizing in this context means gaining synthetic exposure to equities by going long equity futures and as you said you still have your cash, thus maintaining liquidity you would short equity futures, again in this context, to synthetically create cash, and this cash can be used, for instance, to get synthetic exposure to bonds, by buying bond futures
How does that part work? If you short a future, you get the return exposure, but you end up paying margin (if the future goes against you) by selling your equity. I don’t see where you get the money put down the margin on the bond futures. It seems to me that to do this while maintaining liquidity, you need to have a real cash allocation along with a synthetic cash allocation.