Posted at 00:06h
in Credit Spectrum
Dear Prof.Rutledge, dear Prof. Raynes, ..., you distinguish value creation and optimization.This distinction is important indeed, I may ask you to let me know, where this critical distinction is expanded and profounded ( literature, artcles etc). Yours sincerely, Hubert Gantz WP.u.StB. /CPA
Dear Mr. Gantz,
First, let me thank you very much for your question and apologize for taking so long to respond. I will first quote from the book so that the context of your query is clear to other readers:
"Optimization increases average wealth by redistributing the margins of risk and return locally; value creation
increases total wealth," Raynes & Rutledge, The Analysis of Structured Securities
, OUP 2003, p. 92.
Optimization is a financial rearrangement that produces more bang for the buck.