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Introduction to Structured Finance

Book Description

Created by the experienced author team of Frank Fabozzi, Henry Davis, and Moorad Choudhry, Introduction to Structured Finance examines the essential elements of this discipline. It is a convenient reference guide—which covers all the important transaction types in one place—and an excellent opportunity to enhance your understanding of finance.

Table of Contents

  1. Cover Page
  2. Title Page
  3. Dedication
  4. Copyright
  5. Contents
  6. Preface
  7. About the Authors
  8. CHAPTER 1: Introduction
    1. DEFINITION OF STRUCTURED FINANCE
    2. OTHER DEFINITIONS OF STRUCTURED FINANCE
    3. CASE STUDY: HOW ENRON HAS AFFECTED THE BOUNDARIES OF STRUCTURED FINANCE
    4. CONCLUSIONS
  9. CHAPTER 2: Interest Rate Derivatives
    1. INTEREST RATE FORWARD AND FUTURES CONTRACTS
    2. FUTURES CONTRACTS
    3. INTEREST RATE SWAPS
    4. OPTIONS
    5. CAPS AND FLOORS
  10. CHAPTER 3: Credit Derivatives
    1. DOCUMENTATION AND CREDIT DERIVATIVE TERMS
    2. CREDIT DEFAULT SWAPS 2
    3. CREDIT DEFAULT SWAP INDEX
    4. BASKET DEFAULT SWAPS
    5. ASSET SWAPS
    6. TOTAL RETURN SWAPS
    7. ECONOMICS OF A TOTAL RETURN SWAP
  11. CHAPTER 4: Basic Principles of Securitization
    1. WHAT IS A SECURITIZED TRANSACTION?
    2. ILLUSTRATION OF A SECURITIZATION
    3. REASONS WHY ENTITIES SECURITIZE ASSETS
    4. BENEFITS OF SECURITIZATION TO INVESTORS
    5. WHAT RATING AGENCIES LOOK AT IN RATING ASSET-BACKED SECURITIES
    6. DESCRIPTION OF THE COLLATERAL
    7. PREPAYMENTS MEASURES
    8. DEFAULTS AND DELINQUENCIES
  12. CHAPTER 5: Securitization Structures
    1. USE OF INTEREST RATE DERIVATIVES IN SECURITIZATION TRANSACTIONS 1
    2. CREDIT ENHANCEMENT
    3. MORE DETAILED ILLUSTRATION OF A SECURITIZATION
  13. CHAPTER 6: Cash Flow Collateralized Debt Obligations
    1. FAMILY OF CDOS
    2. BASIC STRUCTURE OF A CASH FLOW CDO
    3. CDOS AND SPONSOR MOTIVATION
    4. COMPLIANCE TESTS
  14. CHAPTER 7: Synthetic Collateralized Debt Obligation Structures
    1. MOTIVATIONS FOR SYNTHETIC CDOS
    2. MECHANICS
    3. FUNDING MECHANICS
    4. INVESTOR RISKS IN SYNTHETIC TRANSACTIONS
    5. VARIATIONS IN SYNTHETIC CDOS
    6. THE SINGLE-TRANCHE SYNTHETIC CDO
    7. SUMMARY OF THE ADVANTAGES OF SYNTHETIC STRUCTURES
    8. FACTORS TO CONSIDER IN CDO ANALYSIS
    9. CASE STUDY
  15. CHAPTER 8: Securitized and Synthetic Funding Structures
    1. COMMERICAL PAPER
    2. ASSET-BACKED COMMERCIAL PAPER
    3. SYNTHETIC FUNDING STRUCTURES
  16. CHAPTER 9: Credit-Linked Notes
    1. DESCRIPTION OF CLNS
    2. ILLUSTRATION OF A CLN
    3. INVESTOR MOTIVATION
    4. SETTLEMENT
    5. FORMS OF CREDIT LINKING
    6. THE FIRST-TO-DEFAULT CREDIT-LINKED NOTE
  17. CHAPTER 10: Structured Notes
    1. STRUCTURED NOTES DEFINED
    2. MOTIVATION FOR INVESTORS AND ISSUERS
    3. ISSUANCE FORM AND ISSUERS
    4. CREATING STRUCTURED NOTES
    5. EXAMPLES OF STRUCTURED NOTES
  18. CHAPTER 11: Large Ticket Leasing: Leasing Fundamentals
    1. HOW LEASING WORKS
    2. TYPES OF EQUIPMENT LEASES
    3. FULL PAYOUT LEASES VERSUS OPERATING LEASES
    4. REASONS FOR LEASING
    5. TYPES OF LESSORS
    6. LEASE BROKERS AND FINANCIAL ADVISERS
    7. LEASE PROGRAMS
    8. FINANCIAL REPORTING OF LEASE TRANSACTIONS BY LESSEES
    9. FEDERAL INCOME TAX REQUIREMENTS FOR TRUE LEASE TRANSACTIONS
    10. SYNTHETIC LEASES
    11. VALUING A LEASE: THE LEASE OR BORROW-TO-BUY DECISION
  19. CHAPTER 12: Leveraged Lease Fundamentals
    1. PARTIES TO A LEVERAGED LEASE
    2. STRUCTURE OF A LEVERAGED LEASE
    3. CLOSING THE TRANSACTION
    4. CASH FLOWS DURING THE LEASE
    5. DEBT FOR LEVERAGED LEASES
    6. FACILITY LEASES
    7. CONSTRUCTION FINANCING
    8. CREDIT EXPOSURE OF EQUITY PARTICIPANTS
    9. TAX INDEMNIFICATION FOR FUTURE CHANGES IN TAX LAW
    10. NEED FOR A FINANCIAL ADVISER
    11. THE STEPS IN STRUCTURING, NEGOTIATING, AND CLOSING A LEVERAGED LEASE
  20. CHAPTER 13: Project Financing
    1. WHAT IS PROJECT FINANCING?
    2. REASONS FOR JOINTLY OWNED OR SPONSORED PROJECTS
    3. CREDIT EXPOSURES IN A PROJECT FINANCING
    4. KEY ELEMENTS OF A SUCCESSFUL PROJECT FINANCING
    5. CAUSES FOR PROJECT FAILURES
    6. CREDIT IMPACT OBJECTIVE
    7. ACCOUNTING CONSIDERATIONS
    8. MEETING INTERNAL RETURN OBJECTIVES
    9. OTHER BENEFITS OF A PROJECT FINANCING
    10. TAX CONSIDERATIONS
    11. DISINCENTIVES TO PROJECT FINANCING
    12. RECENT TRENDS
  21. APPENDIX A: The Basel II Framework and Securitization
    1. BASEL RULES
    2. IMPACT ON SECURITIZATION AND CREDIT DERIVATIVES
  22. APPENDIX B: Synthetic Securitization: Case of Mortgage-Backed Securities
    1. TRANSACTION DESCRIPTION
    2. DEAL STRUCTURES
    3. INVESTOR CONSIDERATIONS 3
  23. APPENDIX C: Home Run! A Case Study of Financing the New Stadium for the St. Louis Cardinals
    1. ENDNOTES
  24. APPENDIX D: Municipal Future-Flow Bonds in Mexico: Lessons for Emerging Economies
    1. MEXICO IN THE LATE 1990s
    2. FUTURE-FLOW SECURITIZATION
    3. APPLICABILITY TO MEXICO
    4. ARGENTINA: AN EARLY TEST OF THE METHODOLOGY
    5. IMPLEMENTATION IN MEXICO
    6. CREDIT ENHANCEMENT FEATURES
    7. VARIATIONS ON THE BASIC MODEL
    8. COSTS AND RISKS
    9. APPLICABILITY TO OTHER EMERGING ECONOMIES: THE CASE OF SOUTH AFRICA
    10. CONCLUSION: BACK TO BASICS
    11. REFERENCES
  25. APPENDIX E: Crown Castle Towers LLC, Senior Secured Tower Revenue Notes, Series 2005-1
    1. TRANSACTION OVERVIEW
    2. ORGANIZATIONAL STRUCTURE OF CROWN CASTLE INTERNATIONAL CORP.
    3. MOODY'S REVIEW AND CASH FLOW ANALYSIS
    4. STRUCTURE AND CREDIT ENHANCEMENT
    5. REPRESENTATIONS AND WARRANTIES
    6. MANAGER
    7. SERVICER
    8. RATINGS
    9. TRANSACTION SUMMARY
  26. APPENDIX F: MVL FIlm Finance LLC
    1. RATING SUMMARY
    2. STRUCTURE SUMMARY
  27. APPENDIX G: Presale: Honda Auto Receivables 2006-1 Owner Trust
  28. APPENDIX H: Presale: ACG Trust III
    1. ACG Trust III Notes Series 2005-1 Assigned Preliminary Ratings; Outlook Stable
  29. APPENDIX I: CNH Equipment Trust 2006-A
  30. APPENDIX J: CIT Equipment Collateral 2006-VT1
  31. Index