- 67 - Flow of Benefits in 11/17/89 Structured Transaction Diagram 1 Purchase Citicorp Notes at the Bid < ACM Expected benefit to Bank = $$ BoT/BFCE Issue Contingent LIBOR Notes at the ask = Expected benefit to Bank = $ Swaps AMerrill Capital puts the bank (BoT or BFCE) into the Expected benefit Postion of a dealer to Merrill = $$$ ABank expects to benefit by executing transactions at Dealer prices (benefit shown as $ + $$) ? AThrough swaps, most of the expected benefit of dealer Pricing is transferred back to Merrill (shown as $$$) Merrill ABank is left with sub-LIBOR funding, but has taken Capital Incremental credit risk Flow of Benefits in 12/22/89 Structured Transaction Diagram 2 Purchase Contingent LIBOR Notes at the Bid Southampton < Sparekassen Hamilton Benefit to Bank = $$ Hedge Swap AMerrill Capital puts the bank (Sparekassen)into the Benefit to Position of a dealer Merrill = $ ABank benefits by executing transacation at a dealer's Price (benefit shown as $$) AThrough Hedge Swap, most of the benefit of dealer ? Pricing is transferred back to Merrill (shown as $) Merrill ABank is left with above-market asset, but has taken Capital Incremental credit riskPage: Previous 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 Next
Last modified: May 25, 2011