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Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition by Youssef F. Bissada, Jean Dermine

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Synthetic securitization

In Stage 10 we discussed that banks sometimes wanted to sell loans to reduce their credit risk or to free up capital. An alternative to asset sale and securitization is synthetic securitization. The bank keeps the loan on its balance sheet, but eliminates – swaps – the credit risk through a credit default swap.

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