Introduction to Structured Finance

by Frank J. Fabozzi (School of Management, Yale Univ.); Henry A. Davis; Moorad Choudhry ( )

• ISBN13: 9780470107805
• ISBN10: 0470107804
• Format: eBook
• Copyright: 2007-01-01
• Publisher: Wiley

Summary

Created by the experienced author team of Frank Fabozzi, Henry Davis, and Moorad Choudhry, Introduction to Structured Finance examines the essential elements of this discipline. It is a convenient reference guide-which covers all the important transaction types in one place-and an excellent opportunity to enhance your understanding of finance.

Table of Contents

Preface

About the Authors

Introduction

Definition of Structured Finance

Other Definitions of Structured Finance

Case Study: How Enron Has Affected the Boundaries of Structured Finance

Conclusions

Interest Rate Derivatives

Interest Rate Forward and Futures Contracts

Futures Contracts

Interest Rate Swaps

Options

Caps and Floors

Credit Derivatives

Documentation and Credit Derivative Terms

Credit Default Swaps

Credit Default Swap

Index

Basket Default Swaps

Asset Swaps

Total Return Swaps

Economics of a Total Return Swap

Basic Principles of Securitization

What Is a Securitized Transaction?

Illustration of a Securitization

Reasons Why Entities Securitize Assets

Benefits of Securitization to Investors

What Rating Agencies Look at in Rating Asset-Backed Securities

Description of the Collateral

Prepayments Measures

Defaults and Delinquencies

Securitization Structures

Use of Interest Rate Derivatives in Securitization Transactions

Credit Enhancement

More Detailed Illustration of a Securitization

Cash Flow Collateralized Debt Obligations

Family of CDOs

Basic Structure of a Cash Flow CDO

CDOs and Sponsor Motivation

Compliance Tests

Synthetic Collateralized Debt Obligation Structures

Motivations for Synthetic CDOs

Mechanics

Funding Mechanics

Investor Risks in Synthetic Transactions

Variations in Synthetic CDOs

The Single-Tranche Synthetic CDO

Summary of the Advantages of Synthetic Structures

Factors to Consider in CDO Analysis

Case Study

Securitized and Synthetic Funding Structures

Commerical Paper

Asset-Backed Commercial Paper

Synthetic Funding Structures

Credit -Linked Notes

Description of CLNs

Illustration of a CLN

Investor Motivation

Settlement

Forms of Credit Linking

The First-to-Default Credit-Linked Note

Structured

Notes

Structured Notes Defined

Motivation for Investors and Issuers

Issuance Form and Issuers

Creating Structured Notes

Examples of Structured Notes

Large Ticket Leasing: Leasing Fundamentals

How Leasing Works

Types of Equipment Leases

Full Payout Leases versus Operating Leases

Reasons for Leasing

Types of Lessors

Lease Brokers and Financial Advisers

Lease Programs

Financial Reporting of Lease Transactions by Lessees

Federal Income Tax Requirements for True Lease Transactions

Synthetic Leases

Valuing a Lease: The Lease or Borrow-to-Buy Decision

Leveraged Lease Fundamentals

Parties to a Leveraged Lease

Structure of a Leveraged Lease

Closing the Transaction

Cash Flows During the Lease

Debt For Leveraged Leases

Facility Leases

Construction Financing

Credit Exposure of Equity Participants

Tax Indemnification for Future Changes in Tax Law

Need for a Financial Adviser

The Steps in Structuring, Negotiating, and Closing a Leveraged Lease

Project Financing

What Is Project Financing?

Reasons for Jointly Owned or Sponsored Projects

Credit Exposures in a Project Financing

Key Elements of a Successful Project Financing

Causes for Project Failures

Credit Impa

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