Method, software program, and system for structuring risk in a financial transaction
A computer-implemented method and system along with a processor readable medium for structuring a financial transaction. The invention includes the steps of associating, by a computer system, a first senior holder and a first subordinate holder with a first credit having a first obligation to make at least one payment, including holding in a first sub-pool a first subordinate obligation of the first obligation to pay the first subordinate holder from the first credit; associating, by the computer system, a second senior holder and a second subordinate holder with a second credit having a second obligation to make at least one payment, including holding in a second sub-pool a second subordinate obligation of the second obligation to pay the second subordinate holder from the second credit; and structuring in at least one computer memory, payments from the second subordinate holder financial instrument to perform the obligation of the first credit for the benefit of the first senior holder to the extent that the first credit enters a default state and payments due the first senior holder from all obligations in the first sub-pool to make the payments are not available.
1. A computer-implemented method for structuring a financial transaction, which comprises:
associating, by a computer system, a first senior holder and a first subordinate holder with a first credit having a first obligation to make at least one payment, including holding in a first sub-pool a first subordinate obligation of the first obligation to pay the first subordinate holder from the first credit; and
structuring in at least one computer memory, at least one payment from a financial instrument associated with a second sub-pool to perform the obligation of the first credit for the benefit of the first senior holder to the extent that the first credit enters a default state and another payment due the first senior holder from at least one obligation in the first sub-pool to make the other payment is not available.
2. The method of claim 1 , which further comprises:
associating, by the computer system, a second senior holder and a second subordinate holder with a second credit having a second obligation to make at least one payment, including holding in a second sub-pool a second subordinate obligation of the second obligation to pay the second subordinate holder from the second credit.
3. The method of claim 1 , which further comprises:
increasing in the at least one computer memory a credit rating for the first credit based on an increased likelihood that a payment default by the first credit can be fully absorbed.
4. The method of claim 1 , wherein the first credit is specified by a financial instrument in the form of a bond.
5. The method of claim 1 , which further comprises:
adjusting the first credit based on the structured payment.
6. The method of claim 1 , wherein risks within the first sub-pool are similar to each other, and the risks are different than other risks within the second sub-pool.
7. The method of claim 1 , which further comprises:
issuing for the first subordinate obligation, first tranched trust bonds comprising a senior trust bond related to the first subordinate obligation and a junior trust bond.
8. The method of claim 7 , wherein a given bond of the senior and junior trust bonds include terms that are based on terms of the first subordinate obligation, and wherein the terms further comprises an interest rate yield paid for the given bond that is different than an interest rate yield of the first subordinate obligation.
9. The method of claim 8 , wherein the interest rate yield of the given bond is higher than the interest rate yield of the first subordinate obligation.
10. The method of claim 7 , wherein the first credit has i) an underlying rating based on a tranching of the tranched trust bonds and ii) a credit rating based on an increased likelihood that a payment default by the first credit can be fully absorbed.
11. The method of claim 7 , which further comprises:
securing a given trust bond within the first tranched trust bonds first with a debt service reserve fund and second with a net revenue pledge from the payment due to the first subordinate holder.
12. The method of claim 7 , wherein the first tranched trust bonds are held within the first sub-pool.
13. The method of claim 12 , wherein a trust payment due for a given trust bond in the sub-pool are paid to a senior holder of a credit that is related to the given trust bond before being paid to another senior holder of another credit that is unrelated to the given trust bond.
14. A computer-implemented system for structuring a financial transaction, the system including a processor for operating various financial modules, the system comprising:
a computer implemented association module configured for:
associating a first senior holder and a first subordinate holder with a first credit having a first obligation to make at least one payment;
a computer implemented allocation module configured for:
allocating in a first sub-pool a first subordinate obligation of the first obligation to pay the first subordinate holder from the first credit;
a computer implemented credit module configured for:
structuring in a database module, at least one payment from a financial instrument associated with a second sub-pool to perform the obligation of the first credit for the benefit of the first senior holder to the extent that the first credit enters a default state and another payment due the first senior holder from at least one obligation in the first sub-pool to make the other payment is not available.
15. The system of claim 14 , wherein the association module is further configured for:
associating a second senior holder and a second subordinate holder with a second credit having a second obligation to make at least one payment.
16. The system of claim 14 , which further comprises a further computer module configured for:
increasing in at least one computer memory a credit rating for the first credit based on an increased likelihood that a payment default by the first credit can be fully absorbed.
17. The system of claim 14 , wherein the first credit is specified by a financial instrument in the form of a bond.
18. The system of claim 14 , wherein the credit module is further configured for adjusting the first credit based on the structured payment.
19. A computer non-transitory readable medium for structuring a financial transaction comprising instructions than when executed by a processor causes the processor to perform actions which comprises:
associating a first senior holder and a first subordinate holder with a first credit having a first obligation to make at least one payment, including holding in a first sub-pool a first subordinate obligation of the first obligation to pay the first subordinate holder from the first credit; and
crediting a payment from a second subordinate holder financial instrument to perform the obligation of the first credit for the benefit of the first senior holder to the extent that the first credit enters a default state and another payment due the first senior holder from an obligation in the first sub-pool to make the other payment is not available.
20. The medium of claim 19 , wherein the actions further comprise:
associating a second senior holder and a second subordinate holder with a second credit having a second obligation to make at least one payment, including holding in a second sub-pool a second subordinate obligation of the second obligation to pay the second subordinate holder from the second credit.