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Cf92

Member
hi there

Could a CLN be considered a form of self insurance as you sell the underlying assets to an SPV while simultaneously buying gov bonds. The investors will then get the protection buyer premium payments to the spv from the original company along with interest from the gov bonds.

Ultimately it would only crystallise if the bond failed.

Thanks
 
You could consider it a sort of self-insurance - but be careful with your description here. The underlying assets are not sold to the SPV - a portion of the cashflows from the underlying assets are passed to the SPV. It is the SPV that buys the Government bonds. The SPV is a separate entity.

I'm not sure what you mean by "Ultimately it would only crystallise if the bond failed."
 
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