Structured Finance

Posted in Finance, Accounting and Economics Terms, Total Reads: 266
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Definition: Structured Finance

Structured Finance typically refers to complex financial transactions that are offered to companies that have unique financing needs. This covers all advanced private and public financial arrangements that exist to essentially refinance any activity that is beyond the conventional forms of balance sheet securities such as debts, bonds, equity, etc.


This is done in order to lower the costs of capital and also to mitigate costs of market impediments on liquidity etc. It has become a major segment in the financial industry post 1985.

 

Most of these investments combine traditional assets and claims which are contingent in nature, to form risk transfer derivatives etc. Typical examples of structured financial instruments would be CDOs and CBOs which are collateralized debt and collateralized bond obligations respectively. Advanced instruments such as syndicated loans and synthetic financial instruments also fall in this category.

 

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