KIC000032 - Structure of a COO(continued:> Arbitrage Versus Balance Sheet Transactions CDOs are categorized as either arbitrage transactions

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
... --------------------------------------------------------------- Structure of a COO (continued) :>- Arbitrage Versus Balance Sheet Transactions ./ CDOs are categorized as either arbitrage transactions or balance sheet transactions . ./' The categorization depends 011 the motivation of the sponsor of the rransacrion . ./ In an orbllrage rransaCl/Ofl, the sponsor seeks 10 earn the spread between the higher yield received OIl the collateral assets and the lower yield paid to the various traeches in the structure . ./ lJ1 a balance. sneenronsocuon, the sponsor's motivation is 10 remove debe instruments from its balance sheer. --~"'".,-_ ..... --_ .. - ... - Balance Sheet COO/CLO Banks are required to hold capital against loans that they make and holding capttalts not "ery productive. Balance Sheet CDO/ClO allows a bank to take assets that thev have on their balance sheet and get rid of them. What do they get to keep 7
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/06/2011 for the course FIN 428 taught by Professor Hood during the Fall '11 term at Iowa State.

Page1 / 2

KIC000032 - Structure of a COO(continued:> Arbitrage Versus Balance Sheet Transactions CDOs are categorized as either arbitrage transactions

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online