By Erik Banks
Geared up alongside product strains, the e-book will study a number of the unique periods of established resources, together with personal loan- and asset-backed securities and strips, in addition to the latest dependent and artificial tools, together with exchange-traded cash, credits derivative-based collateralized debt duties, overall go back swaps, contingent convertibles, and insurance-linked securities.
introductory chapters will define the scope of the industry, key definitions, player motivations/goals, economics of structuring and artificial replication, and the crucial "building blocks" utilized in the production of synthetic/structured resources (including on-balance sheet resources and liabilities, derivatives, shelf registration debt courses, inner most placements, trusts, and distinctive objective entities). 8 product chapters will then study the most tools of undefined: loan- and asset-backed securities, stripped/reconstituted executive securities, collateralized debt duties, based notes, insurance-linked securities, exchange-traded cash, convertible bond adaptations, and derivatives/synthetic asset replication. each one product bankruptcy will comprise product descriptions, structural good points (e.g., buying and selling conventions, settlement), arbitrage/investment drivers, and diverse labored examples and diagrams that emphasize functional funding and threat functions; monetary arithmetic may be saved to a minimal. A concluding bankruptcy will overview the basic possibility, felony, regulatory, and accounting beneficial properties of artificial and established resources within the world's significant markets.
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Additional info for Synthetic and Structured Assets (The Wiley Finance Series)
Example text
The same may be true of Company A and its own balance sheet position: if it owns a quantity of the asset that it has sold on a forward basis, a loss on the forward will be offset by a gain on the long position (and vice versa). 8 also illustrates the effects of a long forward acting as a hedge against a short asset position; the reverse hedge position can also be created. The simple examples above apply equally to all price-based forwards. 10 The FRA is a singleperiod, cash-settled contract with a forward rate set on trade date that is compared to the prevailing market rate on the expiry date to generate a net payment between the two parties.
Similarly, if foreign currency swap rates are greater than cash market rates, it can swap its assets into the foreign currency, or swap its liabilities out of the foreign currency; if swap rates are lower than cash rates, it can swap its assets out of the foreign currency and swap its liabilities into the foreign currency. Cross currency swaps are quoted as a fixed foreign currency payment against $ LIBOR flat. Accordingly, changes in the quote level and spread are a function of both interest rates and foreign exchange rates.
Similar conventions exist in non-$ markets. As indicated earlier, cross-currency swaps, involving the exchange of currency flows, were the first OTC swaps in the marketplace. Two parties to a standard currency swap agree to an initial exchange of principal, a series of periodic foreign currency payments, and then a final exchange of principal. As noted, this is distinct from interest rate and basis swap structures, which involve no exchange of notional principal. Currency flows may be swapped on a fixed/fixed, fixed/floating, or floating/floating basis.