PT  - JOURNAL ARTICLE
AU  - Frank J. Fabozzi
AU  - Raymond M. Morel
AU  - Brian D. Grow
TI  - Use of Interest Rate Derivatives in Securitization Transactions
AID  - 10.3905/jsf.2005.570542
DP  - 2005 Jul 31
TA  - The Journal of Structured Finance
PG  - 22--27
VI  - 11
IP  - 2
4099  - https://pm-research.com/content/11/2/22.short
4100  - https://pm-research.com/content/11/2/22.full
AB  - In this article, the authors review the use of interest rate derivatives in securitization transactions for hedging and yield enhancement. Three types of interest rate derivatives commonly used in securitizations are interest rate swaps, interest rate caps, and interest rate corridors. Because these derivatives are over-the-counter or dealer products, not exchange-traded products, they expose the trust to counterparty risk. The authors discuss how counterparty risk is managed in securitizations, including the use of a rating trigger and methods for determining swap termination payments.