Credit Derivatives and Synthetic Securitisation - By Vinod Kothari
The answer to NPL
Credit derivatives, a device of structured trading in credit risks, emerged around 1993 and in a short span of 8 years has attained a global volume of USD 1.5 trillion. Credit derivatives are today used in global banking to transfer risks, clone debt securities, structure and leverage positions on credit assets, etc.
Add to it the device of securitisation, and credit risk becomes a commodity for the capital markets.
The repackaging of NPL,
With an added Growth engine,
The assessment of credit risks,
The securitisation of core assets,
A partner in underwriting the risk,
The sale of the entire stake,
At the lowest loss,
Is better than holding on,
Till maturity an asset,
That is slow in growth.
There will always others,
Who will jump on the bandwagon,
At the right risk and price,
It depends on how much u r willing,
To bite the bullet and carry on,
The reforms in your markets.
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