Wednesday, January 9, 2008

Yeah, Scooby, just what are these pesky things?

What are Structured Investment Vehicles (SIV) ?

What Are Structured Investment Vehicles (SIV)?

The first SIVs were founded in the mid-1980s as bankruptcy-remote entities and were sponsored by large banks or investment managers for the purpose of generating leveraged returns. They do this by earning the spread (differences in yields) between the longer-dated assets purchased and the short-term liabilities issued. The balance sheet of a structured investment vehicle typically contains assets such as asset-backed securities (ABS) and other high-grade securities.

Posted by lvmreader @ 04:00 AM (413 views)
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2 thoughts on “Yeah, Scooby, just what are these pesky things?

  • Maintaining a high quality asset portfolio is a fundamental part of running a SIV. The purchase of these assets is funded through issued liabilities in the form of commercial paper (CP), medium-term notes (MTNs) and subordinate capital notes. The CP and MTN are given the highest credit ratings (AAA or A3) from one or more of the three major rating agencies. The virtually risk-free rating is what makes SIV debt so appealing and successful in the capital markets.

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  • A rotten apple is a rotten apple, not matter what you call it….

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