What is a synthetic collateralized debt commitment?

Synthetic collateralized debt obligation is a derivative financial tool that allows investment in swaps for loan failure and other cashless assets to be exposed to fixed income assets. While a credit failure swap is the only security at a very high risk, synthetic secure debt obligation includes the portfolio of these securities. The tool can be divided into tranhes with different levels of risk, allowing investors to choose the risk for which they are willing to be exposed. Synthetic collateralized debt obligation therefore allows investors to obtain income flow from those on which the base of fixed income assets are an acceptable level of risk. Financial intermediaries such as investment banks and hedge funds of the counterparty. Some debt liabilities for synthetic securing have only one trance. If there are a number of tranches, then investors holding a lower trance will make an initial payment; Higher tranches that are more risky, do not always require tUTO initial payment. The actual capital or mezzanin tends to contain a smaller part of the imaginary amount of the reference portfolio, but probably also carry most of the credit risk.

Revenue from basic assets is transmitted to investors in the form of periodic payments. The use of swaps of credit failure or other credit derivatives helps to ensure that investors get a high return, but there is also a high level of risk. Basic assets regarding these loan swaps can have a high starting rate. If many negative credit events - such as bankruptcy or non -payment & mpomlčka; It happened, then investors can be responsible for losses much higher than their initial investment.

The benefits of synthetic secured debt obligation to investors include flexibility for investors to take a higher or lower risk corresponding to different tract. Time time for whichThe Rou is detained by a debt obligation of synthetic security, it can be quite short, which can be an advantage for some investors. Businesses that hold a large number of commercial loans can ensure their position using synthetic collateralized debt obligations, while these tools can also use speculators to achieve high income with a corresponding risk.