Betekenis van:
risk arbitrage

risk arbitrage

Zelfstandig naamwoord

arbitrage involving risk; as in the simultaneous purchase of stock in a target company and sale of stock in its potential acquirer; if the takeover fails the arbitrageur may lose a great deal of money

For the purpose of this commitment, a ‘CDO’ is a credit portfolio securitisation transaction, with the following characteristics: (i) it entails a repackaging of portfolios of assets, and such assets can be bonds, loans, derivatives or other debt obligations, (ii) the credit risk in respect of such assets is repackaged into multiple tranches of securities of different seniority, sold to investors, and (iii) the transaction is mainly arbitrage driven, i.e. the main goal of the transaction is to provide profits from differences between the market price of the underlying assets and the price at which the securitised risk can be sold in structured form.