TestBank,Chapter9146Chapter9RiskManagement:Asset-BackedSecurities,LoanSales,CreditStandbys,andCreditDerivativesFillintheBlankQuestions1.Whenabanksetsasideagroupofincome-earningassetsandthensellssecuritiesbaseduponthoseassetsitis________________________thoseassets.Answer:securitizing2.Oftenwhenloansaresecuritizedtheyarepassedontoa_________________________whopoolstheloansandsellssecurities.Answer:specialpurposeentity3.A(n)_________________________allowsahomeownertoborrowagainsttheresidualvalueoftheirresidence.Answer:homeequityloan4._________________________allowthebanktogeneratefeeincomeaftertheyhavesoldaloan.Thebankcontinuestocollectinterestandprincipalfromtheborrowersandpassesthesecollectionstotheloanbuyers.Answer:Servicingrights5.Ina_________________________anoutsiderpurchasespartofaloanfromthesellingfinancialinstitution.Generallythepurchaserhasnoinfluenceoverthetermsoftheloancontract.Answer:participationloan6.A(n)_________________________isacontingentclaimofthebankthatissuesit.Theissuingbank,inreturnforafee,guaranteestherepaymentofaloanreceivedbyitscustomerorthefulfillmentofacontractmadebyitscustomertoathirdparty.Answer:standbycreditagreement7.A(n)_________________________occurswhentwobanksagreetoexchangeaportionoralloftheloanrepaymentsoftheircustomers.Answer:creditswap8.A(n)__________________guardsagainstthelossesinthevalueofacreditasset.Itwouldpayoffiftheassetdeclinessignificantlyinvalueorifitcompletelyturnsbad.Answer:creditoption.Rose/Hudgins,BankManagementandFinancialServices,8/e1479.A(n)_________________________combinesanormaldebtinstrumentwithacreditoption.Itallowstheissuerofthedebtinstrumenttoloweritsloanrepaymentsifsomesignificantfactorchanges.Answer:creditlinkednote10.The_________________________ofastandbyletterofcreditisabankorotherinvestorwhoisconcernedaboutthesafetyoffundscommittedtotherecipientofthestandbyletterofcredit.Answer:beneficiary11.A(n)_________________________guaranteestheswappartiesaspecificrateofreturnontheircreditasset.BankAmayagreetopaythetotalreturnontheloantoBankBplusanyappreciationinthemarketvalueoftheloan.InreturnBankAwilloftengetLIBORplusafixedspreadplusanydepreciationinthevalueoftheloan.Answer:totalreturnswap12.The________________________isthepartythatisrequestingastandbyletterofcredit.Answer:accountparty13.The__________________isthebankorfinancialinstitutionwhichguaranteesthepaymentoftheloaninastandbyletterofcredit.Answer:issuer14.A(n)_________________________isaloansalewhereownershipoftheloanistransferredtothebuyeroftheloan,whothenhasadirectclaimagainsttheborrower.Answer:assignment15.Anothertypeofloansaleisa(n)_________________________whichisashortdatedpieceofalongermaturityloan,entitlingthepurchasertoafractionoftheexpectedloanincome.Answer:loanstrip16.ArelativelynewtypeofcreditderivativeisaCDOwhichstandsfor__________________.Answer:collateralizeddebtobligation17.Insurancecompaniesareaprime__________ofcreditderivatives.Answer:seller18.A(n)isanover-the-counteragreementofferingprotectionagainstlosswhendefaultoccursonaloanorotherdebtinstrument.Answer:creditderivativeTestBank,Chapter914819.A(n)isrelatedtothecreditoptionandisusuallyaimedatlendersabletohandlecomparativelylimiteddeclinesinvaluebutwantsinsuranceagainstseriouslosses.Answer:creditdefaultswap20.Therehasbeenanexplosionininrecentyears.Theseinstrumentsrestonpoolsofcreditderivative...
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