1、 3. A（n） _ allows a homeowner to borrow against the residual value of their residence. home equity loan 4. _ allow the bank to generate fee income after they have sold a loan. The bank continues to collect interest and principal from the borrowers and passes these collections to the loan buyers. Ser
2、vicing rights 5. In a _ an outsider purchases part of a loan from the selling financial institution. Generally the purchaser has no influence over the terms of the loan contract. participation loan 6. A（n） _ is a contingent claim of the bank that issues it. The issuing bank, in return for a fee, gua
3、rantees the repayment of a loan received by its customer or the fulfillment of a contract made by its customer to a third party. standby credit agreement 7. A（n） _ occurs when two banks agree to exchange a portion or all of the loan repayments of their customers. credit swap 8. A（n） _ guards against
4、 the losses in the value of a credit asset. It would pay off if the asset declines significantly in value or if it completely turns bad. credit option. 9. A（n） _ combines a normal debt instrument with a credit option. It allows the issuer of the debt instrument to lower its loan repayments if some s
5、ignificant factor changes. credit linked note 10. The _ of a standby letter of credit is a bank or other investor who is concerned about the safety of funds committed to the recipient of the standby letter of credit. beneficiary 11. A（n） _ guarantees the swap parties a specific rate of return on the
6、ir credit asset. Bank A may agree to pay the total return on the loan to Bank B plus any appreciation in the market value of the loan. In return Bank A will often get LIBOR plus a fixed spread plus any depreciation in the value of the loan. total return swap 12. The _ is the party that is requesting
7、 a standby letter of credit. account party 13. The _ is the bank or financial institution which guarantees the payment of the loan in a standby letter of credit. issuer 14. A（n） _ is a loan sale where ownership of the loan is transferred to the buyer of the loan, who then has a direct claim against
8、the borrower. assignment 15. Another type of loan sale is a（n） _ which is a short dated piece of a longer maturity loan, entitling the purchaser to a fraction of the expected loan income. loan strip 16. A relatively new type of credit derivative is a CDO which stands for _. collateralized debt oblig
9、ation 17. Insurance companies are a prime _ of credit derivatives. seller 18.A（n） is an over-the-counter agreement offering protection against loss when default occurs on a loan or other debt instrument. credit derivative19.A（n） is related to the credit option and is usually aimed at lenders able to
10、 handle comparatively limited declines in value but wants insurance against serious losses. credit default swap20.There has been an explosion in in recent years. These instruments rest on pools of credit derivatives that mainly insure against defaults on corporate bonds. The creators of these instru
11、ments do not have to buy and pool actual bonds but can create these instruments and generate revenues from selling and trading in them. synthetic CDOs （Collateralized debt obligations）21.A rates the securities to be sold from a pool of securitized loans so that investors have a better idea of what t
12、he new securities are likely to be worth. credit rating agency22.A（n） is an assurance that investors will be repaid in the event of the default of the underlying loans in a securitization. These can be internal or external to the securitization process and lower the risk of the securities. credit en
13、hancement23.When the FHLMC creates CMOs they often use different which each promise a different coupon rate and which have different maturity and risk characteristics.24.Lenders can set aside a group of loans on their balance sheet, issue bonds and pledge the loans as collateral against the bonds in
14、 . These usually stay on the banks balance sheet as liabilities.25.FNMA （Fannie Mae） and FHLMC （Freddie Mac） are examples of . They appear to have the unofficial backing of the federal government in the event of default. government sponsored enterprises （GSEs）True/False Questions T F 26. Securitizat
15、ion is designed to turn illiquid loans into liquid assets in the form of securities sold in the open market. True T F 27. Securitization has the added advantage of generating fee income for banks. T F 28. Securitized assets cannot be removed from a banks balance sheet until they mature. False T F 29
16、. Securitization raises the level of competition for the best-quality loans among banks. T F 30. Servicing rights on loans sold consist of the collection of interest and principal payments from borrowers and monitoring borrower compliance with loan terms. T F 31. A loan sold by a bank to another inv
17、estor with recourse means the bank has given the investor a call option on the loan. T F 32. An account party will seek a banks standby credit guarantee if the banks fee for issuing the guarantee is less than the value assigned the guarantee by its beneficiary. T F 33. Securitization tends to length
18、en the maturity of a banks assets. T F 34. Securitized assets as a source of bank funds are subject to reserve requirements set by the Federal Reserve Board. T F 35. Securitizations of commercial loans usually carry the same regulatory capital requirements for a bank as the original loans themselves
19、. T F 36. Most loans that banks sell off their balance sheets have minimum denominations of at least a million dollars. T F 37. Most loans that banks sell off their balance sheets carry interest rates that usually are connected to long-term interest rates （such as the 30-year Treasury bond rate）. T
20、F 38. In a participation loan the purchaser is an outsider to the loan contract between the financial institution selling the loan and the borrower. T F 39. The buyer of a loan participation must watch both the borrower and the seller bank closely. T F 40. Under an assignment ownership of a loan is
21、transferred to the buyer, though the buyer still holds only an indirect claim against the borrower. T F 41. Loan sales are generally viewed as risk-reducing for the selling financial institution. T F 42. In a CMO, the different tiers （or tranches） of security purchasers face the same prepayment risk
22、. T F 43. A standby letter of credit substantially reduces the issuing banks interest rate risk and liquidity risk. T F 44. Securitization of loans can easily be applied to business loans since these loans tend to have similar cash flow schedules and comparable risk structures. T F 45. The advantage
23、 of a credit swap is that it allows each bank in the swap to broaden its market area and spread out its credit risk on its loans. T F 46. Bank use of credit derivatives is dominated by the largest banks. T F 47. The credit derivatives market has grown nine-fold during the recent years. T F 48. Banks
24、 are the principal sellers of credit derivatives. T F 49. Banks are one of the principal buyers of credit derivatives. T F 50. Insurance companies are one of the principal sellers of credit derivatives. Multiple Choice Questions 51. Securitized assets carry a unique form of risk called: A） Default r
25、isk B） Inflation risk C） Interest-rate risk D） Prepayment risk E） None of the above D 52. Short-dated pieces of a longer-term loan, usually maturing in a few days or weeks, are called: A） Loan participations B） Servicing rights C） Loan strips D） Shared credits C 53. The party for whom a standby cred
26、it letter is issued by a bank is known as the: A） Account party B） Beneficiary C） Representative D） Credit Guarantor A 54. When a bank issues a standby credit guarantee on behalf of one of its customers, the party receiving the guarantee is known as the: C） Obligator D） Servicing agent B 55. Securitization had its origin in the selling of securities backed by _ A） Credit card receivables B） Residential mortgage loans C） Computer leases D） Automobile loans E） Truck leases 56. Loan-backed securities, which
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