What is structured Trade finance ?
Structured Finance is a complex form of financing, usually used on a scale too large for an ordinary loan or bond. Collateralized debt-obligations, syndicated loans and Mortgage-Backed Securities – the C4 behind the 2008 financial crisis – are all examples of Structured Finance.
Structured trade finance is typically indicated for borrowers—mostly extensive corporations—who have highly specified needs that a simple loan or another conventional financial instrument will not satisfy. In most cases, structured finance involves one or several discretionary transactions to be completed; as a result, evolved and often risky instruments must be implemented.
Importance of structured trade finance
Increasingly, structured financing are used by many corporations, governments, and financial intermediaries to manage risk, develop financial markets, expand business reach, and design new funding instruments for advancing, evolving, and complex emerging markets.
For these entities, using structured financing transforms cash flows and reshapes the liquidity of financial portfolios, in part by transferring risk from sellers to buyers of the structured products. Structured finance mechanisms have also been used to help financial institutions remove specific assets from their balance sheets.
Usage of structure trade finance
When a standard loan is not enough to cover unique transactions dictated by a corporation's operational needs, a number of structured finance products may be implemented. Along with CDOs and CBOs, collateralized mortgage obligations (CMOs), credit default swaps (CDSs), and hybrid securities, combining elements of debt and equity securities, are often used.