While a synthetic securitisation is similar to a traditional one, here there is no actual transfer of the receivables to the SPV. Instead, some form of derivative product, such as a credit default swap (CDS) is used to gain risk exposure to a specified pool of receivables; the swap counterparty in the derivative contract agrees to pay the losses suffered by the owner of the assets (usually the originator) if a ‘credit event’ such as payment default occurs in the assets.
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