SYSTEM AND METHOD USING SECURITIES ISSUANCE FOR RISK TRANSFERENCE

摘要

Disclosed herein is a system and method for eliminating or transferring the non-economic risk of financial securities. The system and method serves to avoid non-economic losses in the first instance, and to counter the adverse capital impact of prior non-economic gap losses by providing capital relief consistent with a determined protected amount. An investor purchases from a financial institution a number of shares whose principal repayment at redemption is contingent upon the maturity proceeds of a designated fixed income securities (FIS) Portfolio. If the aggregate principal payment of the FIS Portfolio is less than a stipulated value, the shares are redeemed for less than the original purchase price. Otherwise the financial institution will repay the full principal amount of the shares at the stated redemption date. To secure the obligation to repay share principal, the financial institution pledges security that is invested in securities that are held in trust and margined periodically.