Securitization Law and Practice: In the Face of the Credit Crunch

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Kluwer Law International, 2008 - Law - 480 pages
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Securitization--once a fairly straightforward means of offering collateral for investment--has mushroomed into a massively complex area of financial practice. The central role occupied by such risk-distributing products as collateral debt obligations (CDOs), credit default swaps (CDSs), collateral loan obligations (CLOs), and credit derivatives has given rise to one of the most crucial inquiries of our era: Is the financial collapse that threatens the world financial system due merely to rogue traders? Or is there something in the derivative idea itself that spells inevitable disaster? Most important, can we isolate the truly productive aspects of securitization and learn to recognise pitfalls in advance? As always in such ideational minefields, it is the legal practitioners who are expected to provide guidance to distressed investors and asset dealers. Hence this vital new book. Written from a distinctly practical point of view by Jan Job de Vries Robb with contributions from Paul Ali and Tim Coyne--all three leading authorities with extensive experience as counsel both in-house and in private practice, in addition to sterling academic credentials--the book sheds clear light on every aspect of today's securitization techniques, including welcome guidance on the following: ; keeping track of exposure to the CDO market; and evaluating such emerging asset classes as commodity risk, microfinance, and project finance risk. In the course of the analysis the book proceeds from the relevant framework and guiding legal principles, through key risks and building blocks in securitization transactions, to the various product classes and sub-classes and their differences and common denominators. Non-credit risk and niche products (such as fund and insurance securitization) are also covered. The final chapters are devoted to the applicable rules as laid down in Basel II and International Financial Reporting Standards.
 

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Contents

Chapter
3
Structure and Documentation
9
C
19
Chapter 5
33
The Liability Side
36
Assets
63
Chapter 3
97
D
144
Implementation of Basel II
427
Chapter 11
431
an AustralianEuropean Perspective
433
Securitizations
441
Accounting Analysis Applying the Flow Chart
447
Has the Entity Transferred Substantially all the Risks and Rewards?
448
Accounting Analysis
449
b Has the Entity Transferred its Rights to the Cash Flows?
450

Chapter 4
174
Structured Credit
175
Collateralized Loan Obligations CLOs and Collateralized
197
Synthetic CLOs
199
ii
228
Retail CDOs
263
NonCredit Risk Securitization
297
Commodity Risk Securitization
311
Foreign Exchange Risk Securitization
327
Chapter 6
333
Securitizing Life Insurance Policies
339
Conclusion
346
Chapter 7
349
Recharacterization Risk
364
Whole Business Securitization
373
Conclusion
380
Chapter 10
405
Overview of Structure
451
Has the Us Moved Yet?
452
Us Accounting Overview
453
A Sale Criteria
454
Effective Control Criteria
456
Consolidation
457
Qualifying Special Purpose Entities QSPEs
458
Assets a QSPE May Hold
459
Variable Interest Entity
461
Variable Interest Entities
462
Decision Tree to Determine if Sale or Secured Borrowing
463
Impact of Proposed Changes
464
Subsequent Accounting
465
Conclusion
466
Index
469
Copyright

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