Definition ∞ Structured Finance Products are complex financial instruments that derive their value from underlying assets, often pooled together and then segmented into different tranches with varying risk and return profiles. These products are designed to meet specific investor needs, offering tailored exposure to particular asset classes or risk factors. They typically involve sophisticated legal and financial engineering to repackage cash flows and risks. Their construction allows for customized investment opportunities and risk allocation.
Context ∞ The discussion around structured finance products in the digital asset space involves exploring how traditional financial engineering techniques can be applied to tokenized assets and decentralized finance. Its situation involves the development of on-chain equivalents of collateralized debt obligations or asset-backed securities, leveraging smart contracts for automation. A critical debate centers on the transparency, auditability, and regulatory treatment of these complex digital instruments. News often reports on new DeFi protocols offering tokenized real-world assets or novel yield-generating structures.
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