Glossar
« Previous EntriesCollateralized Mortgage Obligation (CMO)
Sunday, October 2nd, 2011A 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 [...]
Collateralized Loan Obligation (CLO)
Thursday, September 29th, 2011A 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 [...]
Collateralized Bond Obligation (CBO)
Tuesday, September 27th, 2011A 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 [...]
Chase Secured Loan Trust Note (CLST)
Sunday, September 25th, 2011Chase Bank’s preferred vehicle for transferring a large amount of diverse credit risk into an SPV.
Bond Insurance
Friday, September 23rd, 2011An insurance contract that promises the bondholder a payment (maybe not payment in full) in case the debtor defaults.
Bond Guarantee
Thursday, September 22nd, 2011A 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 [...]
BISTRO
Wednesday, September 21st, 2011Definition: 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.
Asset Swap
Tuesday, September 20th, 2011The 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 [...]
Superfloater swap
Wednesday, August 24th, 2011A swap that imitates the characteristics of a superfloater bond in exchange for paying a fixed rate, the counterparty receives a multiple of Libor minus a constant. Example A floating rate borrower wishes not just to protect itself against expected rate rises but actively to benefit from them. It enters a superfloater swap in which [...]
Trigger swap
Monday, August 22nd, 2011A swap that pays a fixed-rate below the market rate. However, if rates rise above a certain trigger level, the fixed-rate payer will pay a floating rate minus a spread determined by the then prevailing floating rate. The result is a below market fixed swap that reverts to a below market floating rate swap when [...]
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