Linked Notes

Credit-linked notes, or CLNs, are known as funded credit derivatives, because the protection seller pays the entire notional value of the contract up front. In contrast, credit default swaps pay only in case of default and are therefore referred to as unfunded. CLNs are often used by borrowers to hedge against credit risk and by investors to enhance their holdings yields. 

Credit-linked notes are hybrid securities, generally issued by an investment-grade entity, that combine a credit derivative with a vanilla bond. Like a vanilla bond, a standard CLN has a fixed maturity structure and pays regular coupons. Unlike bonds, all CLNs, standard or not, link then-returns to an underlying asset s credit-related performance, as well as to the performance of the issuing entity. The issuer, for instance, is usually permitted to decrease the principal amount if a credit event occurs. Say a credit card issuer wants to fond its credit card loan portfolio by issuing debt. To reduce its credit risk, it floats a 2-year credit-linked note. The note has a face value of 100 and pays a coupon of 7.50 percent, which is 200 basis points above the 2-year benchmark. If more than 10 percent of its cardholders are delinquent in making payments, however, the note s redemption payment will be reduced to 85 for every 100 of face value. The credit card issuer has in effect purchased a credit option that lowers its liability should it suffer a specified credit event—in this case, an above-expected incidence of bad debts. 

Why would investors purchase such a note Because its coupon is higher than the one the credit card bank would pay on a vanilla bond and, presumably, higher than the rates for many other investments in the market. In addition, such notes are usually issued below par, so if they are redeemed at par, investors realize a substantial capital gain. 

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We shall now apply the techniques that we described above to prove the topological chirality of some molecular knots and links. Note that if we succeed in proving that a molecular graph is topologically chiral then it will follow that the molecule that it represents is chemically chiral, since any molecular motion corresponds to a rigid or flexible deformation of the molecular graph. In particular, it is not chemically possible for one molecular bond to pass through another molecular bond. 

The arrows point to the two amide or peptide links. Note that in this example, one of the amino acid residues (aspartic acid) has an extra carboxylic acid group in the side chain or R group. As a result, the molecule above is called an acidic tripeptide because it contains more carboxyl groups than amines. 

FIGURE 17.10 Illustration of three types of gel structure, highly schematic. The dots in frame (a) denote the cross-links. Note that the scale may greatly differ. 

Under a guarantee agreement, the originator is able to recover an amount equal to the net realised losses on the reference pool of loans, including the costs incurred in the foreclosure and recovery process, in return for a periodic payment of a guarantee fee. This fee is calculated to make up any shortfall between the interest received on the credit-linked note collateral pool and the expenses and interest costs of the issuing SPV. Realised losses are applied in reverse sequential order to the notes, by can-... 

A credit-linked note (CLN) is a structured note that combines both a debt instrument and a credit derivative. The structured note includes an embedded credit derivative that isolates the credit risk of the reference asset in this way an investor in this type of structured note may be able to transform its credit risk exposure. The investor in this note makes a cash investment in a bondlike instrument and receives a return that is... 

Exhibit 21.12 illustrates the generic credit-linked note. 

Credit-linked notes (CLNs) are the simplest of all credit derivative instruments. They are funded assets issued by a bank or other entity and have credit risk to a second issuer (the Reference Issuer). These notes pay an enhanced coupon to the investor for taking on the added credit risk. These are typically issued our of repackaging vehicles or EMTN programmes. 

The issuer of the bonds under a traditional CDO or ABS structure or of credit-linked notes in a synthetic funded structure is a special purpose vehicle (SPY). The structure relies on the fact that such SPY is bankruptcy remote, that is, the entity is unlikely to become subject to bankruptcy proceedings or claims by other investors. For these purposes, the constitutional documents of the SPY usually prohibit any merger, or consolidation, the SPY is prohibited from engaging in business other than those directly related to the transaction and is restricted from incurring any additional debt. 

Unless embedded in fixed-income products, such as structured or credit-linked notes, the derivatives are off the balance sheet. This status endows them with tremendous flexibility and leverage, characteristics they... 

The telemetry link between the central hub and the remote processing nodes at CASY is a bidirectional radio frequency (RF) telemetry link. Note the telemetry link could also have been a hardwire or telephone link, however, a trade off analysis on the telemetry medium was performed and the RF link was determined to be the most desirable and cost effective approach. (A more detailed discussion of the trade off analysis of the telemetry link will follow). A bidirectional telemetry link was chosen because it allows data to be both transmitted and received at the CPIMS site as well as at the remote processing nodes. Thereby allowing the CPIMS to receive input status as well as initiate output controls commands. 

Two studies reported, by contrast, positive associations of Hct and/or cell number with PbB level. The results of Makino et al. (1997) using Hct parallel the positive link noted earlier for Hb changes. As also noted earlier, this... 

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