Structuring Process of Credit Risk
About the Lecture
The lecture Structuring Process of Credit Risk by Edu Pristine is from the course Archiv - Credit Risk (FRM). It contains the following chapters:
- Structured Finance & Asset Securitization
- Ring - Fencing Assets
- Tranching & Subordination
Author of lecture Structuring Process of Credit Risk
Edu Pristine
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Excerpts from the accompanying material
... other derivative instruments or embedded options to alter the distribution of cash flows. These are customized products which are implemented on a firmby firm basis – the goal is to alter the risk profile or raise capital at a lower funding cost. The common ...
... the risk of the assets. Securitization allows a firm to alter its balance sheet and remove debt and other liabilities. This can also reduce the regulatory capital required to be held in ...
... against the asset and/or maintain an equity interest in the new entity. The debt portion will have a higher priority on the cash flows generated by the underlying assets. Several advantages to the firm are: Risky assets – If the firm owns some risky assets but does not want to ...
... able to obtain more favorable tax or legal status. Adverse Selection – High adverse selection costs such as information asymmetry or opaqueness of assets or ...
... ordering and layering creates subordination at clearly defined break points or attachment points. The most subordinated tranche is the equity tranche it provides credit protection to all the other senior tranches. The second tranche ...
