en     ru     jp
 
 
private banking
private banking
private banking
private banking
private banking
private banking
private banking
     
 
Home
      
Knowledge Base
      
Equity Derivatives and Structured Products Glossary
      
Synthetic collateralised debt obligation
       
 
Back

Synthetic collateralised debt obligation

 Search definitions     
  Search  

Synthetic collateralised debt obligation
A synthetic collateralised Debt obligation (CDO) uses credit derivatives to transfer Credit risk in a Portfolio. This is in contrast to a traditional CDO, which is typically structured as a Securitisation with ownership of the assets transferred to a separate special purpose vehicle (SPV). The assets are funded with the proceeds of Debt and Equity issued by the vehicle. In a synthetic CDO, an Institution transfers the total return or Default Risk of a reference Portfolio via a credit Default Swap, a total return Swap, or a Credit-linked note. The SPV then issues securities with repayment contingent upon the loss on the Portfolio. Proceeds are either held by the vehicle and invested in highly rated, liquid Collateral, or passed-on to the Institution as an investment in a Credit-linked note. Balance Sheet synthetic CDOs are typically used by banks to manage Risk capital and are easier to execute than traditional CDOs. Arbitrage synthetic CDOs are often used by insurance companies and asset managers and exploit the spread between the Yield on the Underlying assets and the reduced Expense of servicing a CDO structure.

See also collateralised Debt obligation
Posted by  Privatebanking.com
 
  Back  
  Print  
  Email  

 

private banking
Get Adobe Flash Player to view the media
FlashPlayer required to view the media
private banking
private banking
private banking
private banking
private banking

 
Home News Library Newsletters Event Calendar Advertise About Contact FAQ
Privacy Policy     Terms of Service
 

©