My old Finance Prof at B School used to talk about skimming the upside on an S&L portfolio while immunising the risk with a put-option to the FSLIC or FDIC...he later went on to found Long-Term Capital Management hedge fund which proved his point in 1998
HBS
Yes, those profs have always been great on theory. And let's not forget that for several years LTCM creamed it. The recent FT blog by Martin Wolf gave us an excellent overview of how the basic hedge fund model works (link elsewhere on BOM
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