The Treasury, the Federal Reserve Board and the Federal Reserve Bank of New York became involved with AIG in September 2008 when a unit of AIG's holding company, AIG Financial Products, had issued credit default swaps on what was later learned to be $2.77 trillion of securities and synthetic securities
backed by mortgages of varying quality.
(143) Predictably, German originators with synthetic securities purchase credit default protection in the form of credit default swaps, for instance, from protection sellers, thus fitting with our overall understanding of synthetic securities transactions.
More generally, the current financial climate might make banks hostile to the idea of keeping a collection of mortgages on their balance sheets as synthetic securities for which they have to purchase credit default swaps.
"What's going to continue to drive the markets are the anecdotal-like news coming from financial institutions on problems with all these synthetic securities
that have been developed by Wall Street," said Johnson Illington Advisors chief investment officer Hugh Johnson.
In three sections covering fixed income securities, corporate debt markets, and structured financial products, he discusses the basics, forms of instruments, the yield curve, hybrid securities, callable and convertible bonds, the Eurobond market, warrants, preference shares and preferred stocks, mortgage and asset- backed securities, covered bonds, synthetic securities
, collateralized debt obligations, index-linked derivatives, and relative value analysis.
This is accomplished either directly through the sale of assets oft the institution's balance sheet to the CDO, or by transferring the risk to the CDO through the use of synthetic securities
. The sponsoring institution typically has retained all or a portion of the equity interest as a means of increasing return on equity.
It is an excellent summary of some of the main analytical considerations in explaining the origins and structure of securitization, how securitization adds value, the basic requirements for securitization, and how synthetic securities
and related derivatives are created.
For example, the portfolio might include bonds, loans or synthetic securities, corporate securities, structured finance securities, assets denominated in U.S.
* Buckets for assets such as structured finance securities, synthetic securities, and guaranteed securities;
Application of defaults to synthetic securities in CDOs is the same as for synthetic CDO structure and includes publicly documented rescheduling.
Many traditional cash flow CDO structures allow for the purchase of synthetic securities as eligible collateral.
This section substantively restates the swap criteria for structured finance transactions that were originally published in Standard & Poor's 1995 publication Global Synthetic Securities