US2008154789A1PendingUtilityA1
Method for executing a single tranche synthetic abs derivative transaction
Est. expirySep 6, 2026(~0.1 yrs left)· nominal 20-yr term from priority
G06Q 40/06
55
PatentIndex Score
0
Cited by
0
References
0
Claims
Abstract
A Single Tranche Synthetic ABS product is designed to replicate economics returns of structured finance collateralized debt obligations (SF CDO) securities and allow parties to express a leveraged and/or correlation view on a custom ABS portfolio by transferring a credit risk of a particular transacted tranche of a portfolio in swap format. The inventions described herein account for an available funds cap risk of the ABS securities within the underlying portfolio in a manner equivalent to a cash analog based on the same underlying portfolio with sequential pay structure.
Claims
exact text as granted — not AI-modified1 . A method comprising:
providing a single tranche derivative transaction, wherein the derivative transaction relates to a reference portfolio, and wherein the single tranche derivative transaction relates to a single transacted tranche within a capital structure including a plurality of reference tranches; allocating an available funds cap risk in the reference portfolio in reverse sequence, the reverse sequence beginning with a most subordinate reference tranche; determining an incurred interest shortfall amount for each of the reference tranches; allocating one or more interest shortfall reimbursements sequentially beginning with a most senior reference tranche that has incurred an interest shortfall and ending with a subordinate tranche; and determining an incurred interest shortfall reimbursement amount for each of the reference tranches.
2 . The method of claim 1 wherein allocating the one or more interest shortfall reimbursements comprises accounting for any deferred or defaulted interest on a cumulative incurred interest shortfall amount of a senior reference tranche.
3 . The method of claim 1 wherein an available funds cap risk in the single tranche derivative transaction on an ABS portfolio is equivalent to a hypothetical sequential-pay cashflow securitization structure based on the same ABS portfolio.
4 . The method of claim 1 wherein an interest shortfall threshold for the transacted tranche is calculated using the formula:
∑
0
n
-
1
RFA
t
.
5 . The method of claim 4 wherein a premium of a reference tranche is calculated using the formula:
min
[
(
S
i
*
OTW
i
*
IPS
*
ACT
360
)
,
max
(
AAP
t
-
∑
i
+
1
m
RFA
t
,
0
)
]
.
6 . The method of claim 5 wherein the outstanding width of a reference tranche is calculated using the formula: max[min(OPP, X i+1 )−max(X i , ALP),0].
7 . The method of claim 5 wherein an aggregate portfolio premium is calculated using the formula:
PRS
*
OPS
t
*
ACT
360
.
8 . The method of claim 1 wherein the incurred interest shortfall for the transacted tranche is calculated using the formula: min(max(PIS t −PISR t −IST n,t ,0), ISC n,t ).
9 . The method of claim 1 wherein the incurred interest shortfall for a reference tranche is calculated using the formula:
min
(
max
(
PIS
t
-
PISR
t
-
∑
0
i
-
1
RFA
t
,
0
)
,
RFA
i
,
t
)
.
10 . The method of claim 1 further comprising determining the incurred interest shortfall reimbursement amount for the transacted tranche using the formula: min(max(PISR t −PIS t −CEIS n,t ,0), CIIS n,t−1 ,*ISCF n,t ).
11 . The method of claim 1 wherein determining the incurred interest shortfall reimbursement amount for each of the reference tranches is performed using the formula:
min
(
max
(
PISR
t
-
PIS
t
-
∑
i
+
1
m
(
RCIIS
t
-
1
*
RISCF
t
)
,
0
)
,
RCIIS
i
,
t
-
1
*
RISCF
i
,
t
)
.
12 . The method of claim 10 wherein an cumulative excess interest shortfall (CEIS) for a transacted tranche is calculated using the formula:
∑
n
+
1
m
RCIIS
t
.
13 . The method of claim 10 wherein a cumulative incurred interest shortfall (CIIS) for the transacted tranche is calculated using the formula: IIS n,t −IISR n,t +(CIIS n,t−1 *ISCF n,t ).
14 . The method of claim 11 wherein a cumulative incurred interest shortfall (CIIS) for each reference tranche is calculated using the formula: RIIS i,t −RIISR i,t +(RCIIS i,t−1 *RISCF i,t ).
15 . The method of claim 10 wherein a compounding factor for the transacted tranche is calculated using the formula:
100
%
+
(
FR
n
+
LIBOR
t
)
*
ACT
360
.
16 . The method of claim 11 wherein a compounding factor for each reference tranche is calculated using the formula:
100
%
+
(
S
i
+
LIBOR
t
)
*
ACT
360
.
17 . A method comprising:
providing a single tranche derivative transaction, wherein the derivative transaction relates to a reference portfolio, and wherein the single tranche derivative transaction relates to a single transacted tranche within a capital structure including a plurality of reference tranches, including at least a transacted tranche, a mezzanine tranche, a senior tranche, and an equity tranche; allocating a portfolio premium for the reference portfolio in a manner equivalent to distributing periodic income in a hypothetical sequential-pay cashflow securitization structure; and applying a sequential allocation of the premium payment in the capital structure and determining premium payments for the transacted tranche and each reference tranche within the capital structure.
18 . The method of claim 17 wherein a premium of the transacted tranche, when the transacted tranche comprises either the mezzanine tranche or the senior tranche, is calculated using the formula:
min
[
(
OTNA
n
,
t
*
FR
n
*
ACT
360
)
,
max
(
AAP
-
∑
n
+
1
m
RFA
t
,
0
)
]
.
19 . The method of claim 17 wherein a premium of the transacted tranche, when the transacted tranche comprises an equity tranche, is calculated using the formula:
max
(
AAP
-
∑
n
+
1
m
FA
t
,
0
)
.
20 . The method of claim 19 wherein the premium is paid in an impaired equity tranche despite full or partial impairment.
21 . The method of claim 18 wherein the premium of the transacted tranche, when the transacted tranche comprises either the mezzanine tranche or the senior tranche, is calculated using the formula:
min
[
(
S
i
*
OTW
i
*
IPS
*
ACT
360
)
,
max
(
AAP
t
-
∑
i
+
1
m
RFA
t
,
0
)
]
.
22 . The method of claim 21 wherein the outstanding width of the transacted tranche is calculated using the formula: max[min(OPP, X i+1 )−max(X i , ALP),0].
23 . The method of claim 21 wherein an aggregate portfolio premium is calculated using the formula:
PRS
*
OPS
t
*
ACT
360
.
24 . A method comprising:
providing a single tranche derivative transaction, wherein the derivative transaction relates to a reference portfolio, and wherein the single tranche derivative transaction relates to a single transacted tranche within a capital structure containing a plurality of reference tranches; determining a level of impairment of each of the plurality of reference tranches following an occurrence of a principal loss in the reference portfolio; allocating said principal loss in a reverse sequence among the plurality of reference tranches beginning with a most subordinate tranche; determining an amount of notional principal to restore each of the plurality of reference tranches following an occurrence of a principal shortfall reimbursement or a writedown reimbursement in the reference portfolio; allocating said principal shortfall reimbursement or writedown reimbursement in sequence among the plurality of reference tranches beginning with a most senior tranche that has been impaired and ending with a most subordinate tranche; determining an amount of a principal reduction for each of the plurality of reference tranches following a principal payment in the reference portfolio; allocating the principal payment in sequence among the plurality of reference tranches beginning with the most senior tranche and ending with the most subordinate tranche, and determining an outstanding tranche notional amount of the transacted tranche and each of the plurality of reference tranches based on the allocation of principal losses, principal shortfall reimbursements, writedown reimbursements, and principal payments,
25 . The method of claim 24 wherein the outstanding tranche notional amount of the transacted tranche is calculated using the formula:
max
[
(
OTN
n
*
ITF
n
)
-
∑
IPL
n
+
∑
IPR
n
-
max
(
∑
PP
-
IPS
+
LC
n
,
0
)
,
0
]
.
26 . The method of claim 24 wherein the incurred principal loss of the transacted tranche is calculated using the formula: min(max(PPL t −PPR t ,0),max(APL t −LT n ),OTNA t−1 ).
27 . The method of claim 24 wherein the incurred principal shortfall reimbursement of a transacted tranche is calculated using the formula: min(max(PPR t −PPL t −max(APL t−1 −LC i ,0),0), max(ΣIPL t −ΣIPR t−1 ,0)).Join the waitlist — get patent alerts
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