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- Title
How Valuable Are the TALF Puts?
- Authors
BHANSALI, VINEER; WISE, MARK B.
- Abstract
Under the TALF program, an investor has the ability to borrow via term loans against eligible TALF assets as collateral. Due to the non-recourse feature of these loans, the borrower in effect possesses a put option for each individual asset in the portfolio, with the maximum amount at risk to the borrower equal to the haircut. We estimate the value of the put under rough but reasonable assumptions, and also show that the portfolio of puts may be significantly more valuable than a hypothetical put on the whole portfolio.
- Subjects
ASSET backed financing; INVESTORS; TERM loans; ASSETS (Accounting); COLLATERAL security; NONRECOURSE debt; OPTIONS (Finance)
- Publication
Journal of Fixed Income, 2009, Vol 19, Issue 2, p71
- ISSN
1059-8596
- Publication type
Article
- DOI
10.3905/jfi.2009.19.2.071