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

PART II

Structured Credit Products and Synthetic Securitisation

Structured products is the generic term used to refer to a wide variety of capital market instruments. They include bonds issued as part of a securitisation, such as asset-backed securities (ABS) and mortgage-backed securities (MBS), which are well established and were first introduced during the 1970s. A more recent product is the collateralised debt obligation (CDO), which is also well established, the first such deal being introduced in 1988. Structured products include various classes of instruments that are also called hybrid products, combinations of two or more basic products such as vanilla bonds and interest rate swaps, or vanilla bonds linked to external references or benchmarks. The literature on this subject is large and in-depth.

In Part II of the book, we examine structured credit products. These are products that combine securitisation technology with credit derivative instruments. As such, they are also examples of synthetic securitisation: synthetic because they replicate the economic effects of securitisation without the actual ‘true sale’ event, which is the building block of traditional securitisation.

For background information, we present an introduction to traditional securitisation. This is then followed by a detailed look at the main synthetic securitisation products, which are synthetic collateralised debt obligations (also known as collateralised synthetic obligations or CSOs) and synthetic ...