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Structured Credit Products: Credit Derivatives and Synthetic Securitisation, 2nd Edition by Moorad Choudhry

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Glossary

A

A note A tranche of a collateralised debt obligation that is senior to other note tranches.

ABS Asset-backed security.

Amortising A financial instrument whose nominal principal amount decreases in size during its life.

Arbitrage The process of buying securities in one country, currency or market, and selling identical securities in another to take advantage of price differences. When this is carried out simultaneously, it is in theory a risk-free transaction. There are many forms of arbitrage transactions. For instance, in the cash market a bank might issue a money market instrument in one money centre and invest the same amount in another centre at a higher rate, such as an issue of 3-month US dollar CDs in the United States at 5.5% and a purchase of 3-month Eurodollar CDs at 5.6%. In the futures market arbitrage might involve buying 3-month contracts and selling forward 6-month contracts.

Arbitrage CDO A collateralised debt obligation (CDO) that has been issued by an asset manager and in which the collateral is purchased solely for the purpose of securitising it to exploit the difference in yields (‘arbitrage’) between the underlying market and securitisation market.

Asset-backed commercial paper (ABCP) A form of commercial paper (CP) that is secured by a purchase of assets.

Asset-backed securities (ABS) Securities that have been issued by a special purpose legal entity (SPV) and which are backed by principal and interest payments on existing assets, which have been ...

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