Insurance Linked Securities transfer a specified set of risks (insurance risks) from a sponsor to investors. ILS have payouts linked to insurance losses and it is an effective way for investors to diversify their portfolio since insurance loss has little correlation with the other financial markets (equity, fixed income). See also Catastrophic Bonds

Investing Essentials

Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

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An attempt to acquire a large portion of a company's stock to gain control by offering stockholders a premium over the market value for their shares.

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