Broad Index Synthetic Trust Offering – Bistro

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Definition: Broad Index Synthetic Trust Offering – Bistro

In December 1997, JP Morgan chase introduced the term BISTRO – Broad Index Synthetic Trust Offering for its collateralized debt obligation (CDO) structure.

According to BISTRO – the originating bank buys credit protection with a Credit default swaps (CDS) that absorbs all credit losses above the threshold.

For example: 1.3% so bank absorbs first 130 million USD of loss.


JPMC securitized a portfolio of more than 300 corporate with 700 million USD. Thus the holders of BISTRO did not take credit loss until it exceeds $830 million.

BISTRO not only hedge economic risk but also regulates capital. Banks use BISTRO to hedge their balance- sheets.

Advantages of BISTRO –

• High Implementation Speed

• No need to fund super-senior elements

• Low transaction costs

• Greater flexibility to provide tailor-made solution for credit risk requirements



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