The Birth Of Structured Products

Financial Instruments A financial asset is something which is defined as an entitlement of future cash flows. However, a financial instrument is a broader term used to describe financial assets and other assets in which there are no organised secondary markets to trade them. However, a financial security is something that can be traded in a secondary market. Attributes of Financial Assets Financial assets are those that: • • • • Have a return of yield expressed in terms of percentage. Have risk in which there is probability the actual return will differ from the expected return. Are liquid in that they can be sold at current market prices with reasonable transaction costs. Are expected to have a set time-pattern of cash flows in or out.

Intermountain has also benefitted from an AA+ bond rating which reduces their borrowing costs. It is critical that the organisation maintains a healthy financial performance so as to retain the rating. A lower rating would add to their financial pressure.

Options:-Portion of debt through insurance company-Continue at 90 day terms-Factor receivables-Collateralize assets-Mortgage general purpose building-Independent Canadian Financing-Flat dividends-Payment Terms - accelerate receipt-LIFO / FIFOEvery available option has a positive and a negative aspect to it. Here we will decipher what option gives Padgett Paper Products the best financial structure, provides the most flexibility for continued growth, and reduces the risk for all parties involved.

The conveyance of a noncash financial asset to someone other than the issuer of that financial asset. The following include transfers: selling a receivable, putting a receivable into securitization trust, and receivable as collateral.

4. the remainder of the interest rate differential is retained by the financial institution as security against credit losses and is paid to Manufactured Homes in proportion to customer payments received by the financial institution

3. “The health care borrower is evaluated by a credit rating agency” (Zelman, McCue, & Glick, 2009).

In the 1980s, investments banks such as Goldman Sachs, Merrill Lynch, Bear Stearns, JP Morgan, and Morgan Stanley started selling mortgage bonds. Mortgage bonds were a collection of thousands of home mortgages, purchased from lenders, and their associated income streams (monthly payment). To address the fact that some homeowners often refinance their debt when interest rates are low which prematurely pays off the debt, mortgage bonds were stacked into layers called ‘tranches’. The lowest tranche represented mortgages to be paid off early, and the highest layer was the last mortgages to be paid off.

Family Finance Co. (FFC), a publicly traded commercial bank, invests in a variety of securities in order to enhance returns greater than interest paid on bank deposits and other liabilities. The primary investments of FFC are collateralized debt obligation, mortgage-backed securities, auction-rate securities, equity securities in nonpublic companies, interest rate swaps, and a fuel swap for gasoline. FFC measures the derivative at fair value, presenting the portion of the fair value change by using the fair value hierarchy. This memo will present the appropriate classification in the fair value

Product- A product is anything that can be offered to a market to satisfy a want or need, products include physical goods, services, experience, events, persons, places, properties organisations, information and ideas. It is therefore the combination of goods

By securitizing the receivables, a larger organization can convert its accounts receivable into cash at once. Hence, individual receivables are combined into a new security and are then sold as an investment instrument. Since securities are backed by a liquid form of collateral, a securitization can result in an extremely low interest rate for the issuing entity. Criterions in ASC 860 states that, transfers in securitization transactions must be evaluated for sale accounting treatment. In addition, they must be evaluated for consolidation by the GAAP criteria, set fourth at ASC 810. Moreover, Securitizations are popular because investors want to acquire collateralized securities and firms with large amounts of receivables have incentives to

(e) Provide safeguards against the withdrawal of assets by the owners of the bankrupt firm and allow insolvent debtors to discharge all of their obligations and to start over unhampered by a burden of prior debt. (Points : 20)

In 2008, one of the worst financial crises since the Great Depression occurred. The severity of this collapse cannot be understated as demonstrated by the bankruptcy of Lehman Brothers, the fourth largest investment bank in the US, and with many other financial institutions such as Merrill Lynch and the Royal Bank of Scotland having to be bailed out. In addition, the Global Banking System was within a whisker of collapsing and if it where not for the trillions of dollars invested in the system by national banks then this banking collapse would have lead to economic catastrophe. Therefore, in order to avoid such a calamity from occurring again, it is important to ask the question why did this financial recession occur and what factors contributed towards this downfall? Although there are many reasons as to why this recession occurred it could be argued that securitized lending and shadow banking played the largest role in this economic crisis. It is therefore important to understand what securitized lending and shadow banking means. Securitized lending is the process by which a financial institution such as a bank pools illiquid assets, such as residential and commercial mortgages and auto loans (by which the bank receives from the public through house mortgages and loans), and loans these newly formed short-term bonds to third party investors in exchange for cash or collateral. Since its creation in the 18th century, securitized lending was increasingly popular and very much

So it is also attractive for Jules Kroll to take this opportunity to enter the credit rating industry. In addition, the “issuer pays” model, which used by the big three rating agencies, lets companies shop around for the best ratings, putting pressure on the agencies to inflate their grades. As a result, it is very difficult to argue that they can adequately represent the users’ side. Therefore, Jules Kroll wants to use another model that can assign unbiased and reliable ratings.

There are various ‘products’ some name it components or levels that constitute a product offered by a company. These can be described as core product, actual product, augmented product and potential product.

would never have been acceptable in a prudent arms' length deal (R v. Bond, 1997).