This was an interesting and helpful topic to read on. Thanks everyone who contributed. In Crouhy notes on Securitization in Credit Risk Module, Page 31, I think the terminology for CLN is more like WIki :
In this structure there are no margin calls, and the maximum downside for the investor is the initial investment of $15 million. If the fall in the value of the loan portfolio is greater than $15 million, then the investor defaults and the bank absorbs any additional loss beyond that limit. For the investor, this is the equivalent of being long a credit default swap written by the bank.
In this structure there are no margin calls, and the maximum downside for the investor is the initial investment of $15 million. If the fall in the value of the loan portfolio is greater than $15 million, then the investor defaults and the bank absorbs any additional loss beyond that limit. For the investor, this is the equivalent of being long a credit default swap written by the bank.
