Template:M intro repack application of proceeds: Difference between revisions
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There comes a time in a asset-backed [[Special purpose vehicle|espievie]]’s life when things go ''[[Germknödel in der Luft]]''. This can happen two ways: | [[Application of proceeds|There]] comes a time in a asset-backed [[Special purpose vehicle|espievie]]’s life when things go ''[[Germknödel in der Luft]]''. This can happen two ways: | ||
The expected way: because some part of the security package — an underlying asset, a swap counterparty or, heaven forbid, the [[paying agent]] has failed. These are regrettable externalities of ''la vie financière'' which no-one ''wants'', exactly, but exposure to these risks, and the compensation one earns for running them, is what motivates repackaging investors to come to the table in the first place: if none of these risks ever came about there would no risk premium either. | The expected way: because some part of the security package — an underlying asset, a swap counterparty or, heaven forbid, the [[paying agent]] has failed. These are regrettable externalities of ''la vie financière'' which no-one ''wants'', exactly, but exposure to these risks, and the compensation one earns for running them, is what motivates repackaging investors to come to the table in the first place: if none of these risks ever came about there would no risk premium either. | ||
The unexpected way: because the [[espievie]] itself has failed. This is unexpected because from its socks and bloomers a [[repackaging vehicle]] is architected so that it ''cannot, even in theory, go bankrupt''. but [[espievie]]s can go bankrupt, in practice — at least in theory. If you see what I mean. But it involves — whisper it — ''someone screwing up''. For an SPV to go insolvent there much be a flaw of some kind in the [[Limited recourse|ring-fencing]]. | The unexpected way: because the [[espievie]] itself has failed. This is unexpected because from its socks and bloomers a [[repackaging vehicle]] is architected so that it ''cannot, even in theory, go bankrupt''. but [[espievie]]s can go bankrupt, in practice — at least in theory. If you see what I mean. But it involves — whisper it — ''someone screwing up''. For an SPV to go insolvent there much be a flaw of some kind in the [[Limited recourse|ring-fencing]]. | ||
Revision as of 12:38, 3 October 2023
There comes a time in a asset-backed espievie’s life when things go Germknödel in der Luft. This can happen two ways:
The expected way: because some part of the security package — an underlying asset, a swap counterparty or, heaven forbid, the paying agent has failed. These are regrettable externalities of la vie financière which no-one wants, exactly, but exposure to these risks, and the compensation one earns for running them, is what motivates repackaging investors to come to the table in the first place: if none of these risks ever came about there would no risk premium either.
The unexpected way: because the espievie itself has failed. This is unexpected because from its socks and bloomers a repackaging vehicle is architected so that it cannot, even in theory, go bankrupt. but espievies can go bankrupt, in practice — at least in theory. If you see what I mean. But it involves — whisper it — someone screwing up. For an SPV to go insolvent there much be a flaw of some kind in the ring-fencing.