Chapter 5. Structured Financing: Asset Securitization and Structured Notes

Agenda

Item 1

Explain what is meant by a structured financing.

Item 2

Identify the elements that generally characterize a structured finance transaction.

Item 3

Describe what is meant by asset securitization.

Item 4

Explain the reasons why a CFO will use a securitization rather than issuing a corporate bond.

Item 5

Explain the role of the special‐purpose vehicle in a securitization transaction.

Item 6

Describe the different forms of credit enhancement in a securitization transaction.

Item 7

Explain what a structured note is.

Item 8

Explain why derivatives are used in the creation of a structured note.

Item 9

Identify the benefts to the issuing corporation for creating a structured note.

Item 10

Describe the reasons why institutional investors are motivated to invest in structured notes.

Item 11

Explain the steps associated with the creation of a structured note.

As an alternative to the traditional sources of funds, including corporate bonds and equity issuance, a CFO can raise funds via a structured finance transaction. Structured finance consists of funding products and/or financing processes that are customized for the entity raising the capital in terms of cash flows, risk sharing, or other features.1 Hence, to meet this requirement, existing products and techniques must be engineered into a tailor‐made product or process. Thus, structured finance is a flexible financial engineering tool.

A large part of what we consider structured ...

Get The Complete CFO Handbook now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.