Introduction to Structured Finance

Preface

This purpose of this book is to provide a broad, comprehensive introduction to structured finance. It is intended for people generally knowledgeable in financial markets who want to learn the fundamentals of structured finance and also for experts in certain areas of structured finance who would like to broaden their knowledge in other areas. This preface briefly walks through an outline of the book and introduces the reader to some of its more important concepts and terms

Our introduction in Chapter 1 recognizes that structured finance is a broad field and that not everyone even agrees on how structured finance is defined and where the boundaries are. We summarize a survey of experts on the definition of structured finance and conclude that our definition should include not only securitization and most applications of credit derivatives, but also leasing, project finance, the use of complex derivatives, and most other unusual, complex financing transactions. We also summarize another survey of experts on how the Enron debacle tested the boundaries of structured finance.

Our definitional survey confirms that derivatives and securitization are the most fundamental building blocks of structured finance. We show numerous combinations of those building blocks as we explain the most important instruments of structured finance in Chapters 2 through 10, followed by a discussion of leasing and project finance in Chapters 11 through 13.

While an interest rate derivative contract ...