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Credit Derivatives (9)
credit risk (1)
Derivate (1)
Glossar (9)
market risk (1)

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Collateralized Mortgage Obligation (CMO)

By admin | October 2, 2011

A note or bond or tranches of notes and/or bonds that an SPV (q.v.) issues,
in order to raise money to buy mortgage loans that serve as collateral for the note(s).
Application: The CMO gets the bonds off the balance sheet of the CMO’s creator,
thus eliminating credit exposure, in return for cash, and allows the creator to structure collateral and notes to provide the desired credit rating.
Comment: The REMIC (q.v.) has replaced the CMO as the vehicle of choice for repackaging mortgage loans and getting them off a mortgage lender’s balance sheet.

Topics: Credit Derivatives, Glossar | 1 Comment »

Collateralized Loan Obligation (CLO)

By admin | September 29, 2011

A note or bond or tranches of notes and/or bonds that an SPV (q.v.) issues,
in order to raise money to buy loans that serve as collateral for the SPV obligations.
Application: The CLO gets the loans and attendant exposure off the balance sheet of the SPV’s creator,
in return for cash, and allows the creator to structure collateral and SPV obligations to provide the desired credit rating.

Topics: Credit Derivatives, Glossar | No Comments »

Collateralized Bond Obligation (CBO)

By admin | September 27, 2011

A note or bond or tranches of notes and/or bonds that an SPV (q.v.) issues, in order to raise money to buy bonds that serve as collateral for the SPV obligations.
Application: The CBO gets the bonds off the balance sheet of the SPV’s creator, in return for cash, and allows the creator to structure collateral and SPV obligations to provide the desired credit rating.

Topics: Credit Derivatives, Glossar | No Comments »

Chase Secured Loan Trust Note (CLST)

By admin | September 25, 2011

Chase Bank’s preferred vehicle for transferring a large amount of diverse credit risk into an SPV.

Topics: Credit Derivatives, Glossar | No Comments »

Bond Insurance

By admin | September 23, 2011

An insurance contract that promises the bondholder a payment (maybe not payment in full) in case the debtor defaults.

Topics: Credit Derivatives, Glossar | No Comments »

Bond Guarantee

By admin | September 22, 2011

A contract that puts the guarantor in place of the debtor, in case of debtor’s default. Thus, a guarantee seems to promise payment in full of the bond’s interest and principal and is like bond insurance (q.v.) that pays off enough to make the borrower whole. Of course, we have to ask, “Who guarantees the guarantor?”

Topics: Credit Derivatives, Glossar | No Comments »

BISTRO

By admin | September 21, 2011

Definition: An acronym for either of the following, depending on who’s talking and who might be listening.
1. Broad Index Secured Trust Offering. J.P.Morgan’s preferred vehicle for transferring a significant amount of diverse credit risk to an SPV.
2. BIS Total Rip Off. An alternative definition of unknown meaning.

Topics: Credit Derivatives, Glossar | No Comments »

Asset Swap

By admin | September 20, 2011

The purchase of a fixed rate instrument, plus a position of paying fixed and receiving floating in an interest rate swap of the same maturity.
A dealer ordinarily arranges both the sale and the swap.
Example: An investor who wants to buy Freddie Mac debt with a floating coupon might buy Freddie Mac’s fixed rate debt and pay fixed in an interest rate swap.
Application: The main reason for doing an asset swap is to tailor a bond’s coupon stream to fit one’s needs,
namely to convert a fixed coupon stream into a floating stream.
Pricing: The asset swap should trade at roughly the cost of the underlying fixed rate instrument,
because the interest rate swap should have zero value at inception.
Risk Management: The asset swap is a tool for converting from the risk of price fluctuations to the risk of payment fluctuations,
since the value of default riskless floating rate debt reverts to par at each reset debt.
Comment: Asset swap spreads are useful for pricing credit default swaps.

Topics: Credit Derivatives, Glossar | No Comments »

The Big Bang : Standardized CDS Contract

By Dave | July 8, 2009

on brokerbase.eu :  The Big Bang : Standardized CDS Contract

Topics: credit risk | No Comments »

Moody’s Outlook for French Banks Remains Negative

By Dave | July 7, 2009

The fundamental credit outlook for the Frenchbanking system remains negative, primarily reflecting further likelydeterioration of the macroeconomic environment, says Moody’s InvestorsService in its new Banking System Outlook on France. Moody’s negative outlook for the French banking system expresses the rating agency’s view on the likely future direction of fundamental credit conditions in the industry over the next 12 to 18 months. It does not represent a projection of rating upgrades versus downgrades.

Topics: market risk | No Comments »

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