Trading involves substantial risk and may result in the loss of your invested/greater that your invested capital, respectively.

    Structured Finance

    Structured finance is a heavily involved financial instrument presented to large financial institutions or companies with complicated financing needs who are unsatisfied with conventional financial products. Since the mid-1980s, structured finance has become popular in the finance industry. Collateralized debt obligations (CDOs), synthetic financial instruments, collateralized bond obligations (CBOs), and syndicated loans are examples of structured finance instruments.


    KEY TAKEAWAYS

    • Structured finance is a financial instrument available to companies with complex financing needs, which cannot be ordinarily solved with conventional financing.
    • Traditional lenders do not generally offer structured financing.
    • Structured financial products, such as collateralized debt obligations, are non-transferable.
    • Structured finance is being used to manage risk and develop financial markets for complex emerging markets.

    Understanding Structured Finance

    Structured finance is typically indicated for borrowers—mostly extensive corporations—who have highly specified needs that a simple loan or another conventional financial instrument will not satisfy. In most cases, structured finance involves one or several discretionary transactions to be completed; as a result, evolved and often risky instruments must be implemented. Benefits of Structured Finance

    Structured financial products are typically not offered by traditional lenders. Generally, because structured finance is required for major capital injection into a business or organization, investors are required to provide such financing. Structured financial products are almost always non-transferable, meaning that they cannot be shifted between various types of debt in the same way that a standard loan can.

    Increasingly, structured financing and securitization are used by corporations, governments, and financial intermediaries to manage risk, develop financial markets, expand business reach, and design new funding instruments for advancing, evolving, and complex emerging markets. For these entities, using structured financing transforms cash flows and reshapes the liquidity of financial portfolios, in part by transferring risk from sellers to buyers of the structured products. Structured finance mechanisms have also been used to help financial institutions remove specific assets from their balance sheets.

    Benefits of Structured Finance

    Structured financial products are typically not offered by traditional lenders. Generally, because structured finance is required for major capital injection into a business or organization, investors are required to provide such financing. Structured financial products are almost always non-transferable, meaning that they cannot be shifted between various types of debt in the same way that a standard loan can.

    Increasingly, structured financing and securitization are used by corporations, governments, and financial intermediaries to manage risk, develop financial markets, expand business reach, and design new funding instruments for advancing, evolving, and complex emerging markets. For these entities, using structured financing transforms cash flows and reshapes the liquidity of financial portfolios, in part by transferring risk from sellers to buyers of the structured products. Structured finance mechanisms have also been used to help financial institutions remove specific assets from their balance sheets.

    Get started today with commission-free stocks & forex trades