Everything you wanted to know about BTC TVS but were afraid to ask!

[as.exchange]

Since the mid-18th century one of the most significant innovations in the financial world was creation of asset-backed securities (ABS), which were represented by the mortgage-backed securities (MBS) in the United States where farm railroad mortgage bonds were issued. Since then, many other types of derivative products were created in an attempt to enhance risk transfer between market participants by securitizing assets or cash-flows. As a result of the advancements in structured products, global OTC derivatives market has grown from nearly US$ 80 trillion in 1998 to almost US$ 700 trillion at the peak in 2011, and slightly over US$ 500 trillion in 2017, which is 6x times greater than global GDP according to IMF.

Despite the importance and size of global derivatives market, and continuous developments, there has been little change to the actual structure of derivatives, as most of them either split pooled assets or pooled cash-flows from the groups of assets using different types of combination of forward commitments or contingent claims with slightly modified parameters.

Distributed Ledger Technology (DLT) promised to innovate and revolutionize the financial industry. However, since the creation of Bitcoin, there has been little innovation in area of financial instruments on their own, but mostly implementation of technology in various fields of finance, thus creating the FinTech hype.

With the emergence of FinTech, people forgot about the “Fin” aspect, and focused entirely on the “Tech” part. There have been dozens of new projects that promised to bring new derivatives to the capital markets, however, all they have done was taking traditional financial products from capital markets, and implementing them in the digital asset space.

However, the most recent financial innovation could be Tranched Value Securities (TVS) [patent pending], first described in the SSRN manuscript.

With this thread we will try to provide a few key points on what is TVS, how to estimate its payouts, how to use them, and what are their benefits.

WHAT IS A TRANCHED VALUE SECURITY (TVS)

“Tranched Value Security (TVS) [patent pending] is a security whose income payments, and hence value is derived from and collateralized (or "backed") by the value of a single asset, group of assets, stream of cash-flows or any other entity or product possibly having a determinable value (and / or price). Value of TVS is derived either from a value share of a specific underlying, or from a minimum contract value, which can equal to the value share of a specific underlying at the contract initiation, given that a higher-level (or “prior”) TVS are satisfied.”


In easier terms, TVS is similar to asset-backed security (ABS), but while the later one splits a pool of assets or pool of cash-flows, TVS splits the value.

It can be easier understood by looking at the CDO mortgage-backed security (MBS) representation from IMF below:



In the diagram above, for any ABS (RMBS (Residential Mortgage Backed Security) in this case), you would need a number of mortgages in order to create a pool of cash-flows, diversify risks, split the pool based on risk/return, and sell pool tranches to investors with appropriate risk/return appetites.

MBS Example:
- You have 10 mortgages, each making $10 payment every month (ignore maturity for now), which is 10 x $10 = $100 monthly;
- With RMBS, a banker would securitize these mortgages and create SPV (Special Purpose Vehicle) that would be collecting these $100;
- SPV would issue various securities and sell those securities to external investors, who can be getting mortgage-backed payouts.

For simplicity assume, the banker creates 3 tranches:
•   Senior tranche (ST): receives $50 fixed, first in a row to receive payouts
•   Mezzanine tranche (MT): receives $30 fixed, second in a row to receive payouts after the ST
•   Junior tranche (JT): receives $20 or whatever left after the ST and MT received their payouts

With such structure, Senior would be priced highest, as it’s first in the row to receive payouts (thus, less risk), and JT would be prices with greatest discount (higher risk / higher return).

If everything goes as planned: three tranches receive what they need to and everyone is happy.
If some mortgages make overpayments: some mortgages make payouts of $15 (prepayment risk – not typically desirable by the ST holders), the extra $5 gets absorbed by the JT (extra return).
If some mortgages default: the JT absorbs the losses first. If two or more mortgages stop paying – JT doesn’t get anything, and then MT might also get nothing.

With TVS, only one mortgage would be enough, to do exactly the same. While 1 mortgage could be making payouts of $100 monthly, at some periods of time it could be paying more or less, and those under-/over-payments could be assigned to the riskier part of payouts pool. It can well be 5 mortgages, or 117.89321 Bitcoins, or 3 T-Bills, or 99 stocks of Apple – as long as the underlying asset has a determinable value, the value can be securitized and TVS can be issued.

TVS Example:
- You have 1 Bitcoin, having a value / price of $100;
- With TVS, a banker would securitize this 1 Bitcoin and create SPV (Special Purpose Vehicle) that would be absorbing Bitcoin value;
- SPV would issue various securities and sell those securities to external investors, who can redeem their newly issued securities value at any point in time.

For simplicity assume, the banker creates 3 value tranches:
•   Senior tranche (ST): receives $50 fixed or 50% or Bitcoin value (whatever is greater), first in a row to receive payouts
•   Mezzanine tranche (MT): receives $30 fixed or 30% of Bitcoin value (whatever is greater), second in a row to receive payouts after the ST
•   Junior tranche (JT): receives $20 or 20% of Bitcoin value (whatever is greater) or whatever left after the ST and MT received their payouts

If Bitcoin price goes up forever linearly without any single decline – the three tranches perform as if they are same shares with 100% same returns. Once Bitcoin price starts declining and then subsequentially changing price – TVSs have different return profiles.

Imagine after issuing TVS, Bitcoin declines to $95 (-5% return):
ST: can get 50% of $95 or $50 => $50 (0% return)
MT: can get 40% of $95 or $40 => $40 (0% return)
JT: should get 20% of $95 or $20 => $20, but that would not be possible, as there’s no value left that can be paid out, therefore, JT gets $95 - $50 - $40 = $5 (-75% return)

Holder of JT decides that it’s too much risk for him as Bitcoin might decline further and sells it to another investor for $5.

Imagine after that, Bitcoin increases to $110 (+15% return):
ST: can get 50% of $110 or $50 => $55 (+10% return)
MT: can get 40% of $110 or $40 => $44 (+10% return)
JT: should get 20% of $110 or $20 => $22 (+340% return)

Thus, by securitizing the value, Tranched Value Security transformed the performance of derivatives backed by the same underlying and issued on the same date.

TVS PAYOUT MODEL

Based on the above example, the generalized version of TVS payouts can be represented as below:



While the above model represents a valid payout model for TVS, the proper pricing model of TVS is still work in progress to be done. Therefore, every trader and user of TVS needs to study the presented derivative thoroughly and make informed decision about how to price it and what to trade it for.

IMPORTANT FEATURES OF TVS

•   Variable Value Share (VVS): the share represented in % terms which can be claimed by the TVS holder based on the asset price, given that the claims of more senior TVSs have been satisfied
•   Fixed Value Share (FVS): the fixed dollar value which can be claimed by the TVS holder based on the asset price, given that the claims of more senior TVSs have been satisfied
•   Underlying Asset: any asset or cash-flow with determinable value that was securitized based on which TVS was issued

From the MBS-type of products the following features can be implied:
•   Attachment Point (AP): the amount by which the underlying asset needs to decline in price in order for the current TVS to start declining in price (if TVS has AP of 10%, it will not lose anything until asset (Bitcoin) declines by at least 10%; once it declines by 10% or more – current TVS also declines)
•   Detachment Point (DP): the amount by which the underlying asset needs to decline in price in order for the current TVS to lose all value (if TVS has DP of 10% and asset (Bitcoin) declines by 10% or more – current TVS is priced at $0)

0.   For TVS to function as assumed, there must be at least 2 TVSs for any specific underlying asset when its securitized
1.   Sum of all TVSs’ VVS must always equal to 100%
2.   Sum of all TVSs’ FVS must always equal to the full price of underlying asset
3.   If 1. or 2. are not satisfied, arbitrage opportunities might be present
4.   While the payout model dictates that TVS might have a price of $0.00, it’s unrealistic assumption as the $0.00 TVS might turn out to be highly valuable if the underlying asset subsequently increases in value, and giving TVS for $0.00 means giving future upside potential for free (as previously $0.00 TVS increases in value it can be redeemed for actual asset, such as Bitcoin (would you give it for free? )); therefore, initially arbitrage opportunities are expected with TVS model
5.   Due to 4. your will never get liquidated position with TVS as with leveraged trading or margin trading
6.   Attachment Point < Detachment Point

HOW TO USE TVS

Tranched Value Securities are a new type of financial instruments, therefore might hinder yet to be discovered risks. However, here we want to highlight only a few strategies that you could implement with TVS.

You have Bitcoin and expect its price to decline

Strategy:
Securitize your Bitcoins, and sell Junior tranches

Example:
•   Bitcoin cost $100 now
•   You have 1 Bitcoin
•   You assume Bitcoin will decline by 20%
•   You securitize your Bitcoin and issue 2 TVSs (for example), where:
-   The Senior TVS has VVS of 80% and FVS of $80
-   The Junior TVS has VVS of 20% and FVS of $20
•   You sell Junior TVS and get $20
•   If Bitcoin declines in value by anything less than 20%, your Senior TVS remains at least at $80 (Junior TVS absorbs losses first)
•   If Bitcoin increases in value, your Senior TVS increases as well

You have Bitcoin and expect its price to increase

Strategy:
Securitize your Bitcoins, and sell Senior tranches, and buy more Junior tranches

Example:
•   Bitcoin cost $100 now
•   You have 1 Bitcoin
•   You assume Bitcoin will increase by 20%
•   You securitize your Bitcoin and issue 2 TVSs (for example), where:
-   The Senior TVS has VVS of 80% and FVS of $80
-   The Junior TVS has VVS of 20% and FVS of $20
•   You sell Senior TVS and get $80
•   With $80 you buy more of Junior TVSs
•   If Bitcoin increases in value your initial Junior TVS will increase by 20% proportionally, but the Junior TVS you bought from others will increase even more
•   If Bitcoin decreases in value, you might become a holder of temporarily $0 value TVS (which is not realistic as described above)


You don’t have Bitcoin and expect its price to decline

Strategy:
Buy Senior TVS from other people

Example:
•   Bitcoin cost $100 now
•   You want to invest in it but don’t want to lose
•   You assume Bitcoin will decline by 20%
•   You buy TVS from others with Attachment Point of at least 20.0000…01%
•   If Bitcoin declines by anything less than 20.0000…01%, your TVS remains at least at what you bought it for
•   If Bitcoin increases in value, your TVS increases as well


You don’t have Bitcoin and expect its price to increase

Strategy:
Buy Junior TVS from other people

Example:
•   Bitcoin cost $100 now
•   You want to invest in and earn more than the market, but don’t want to take leverage
•   You assume Bitcoin will increase by 20%
•   You buy any kind of Junior TVS from others (the more junior – the higher the potential, the more risk)
•   If Bitcoin increases by any amount – you earn more than the market
•   If Bitcoin decreases by at least as much as the Attachment Point of your TVS – you start losing, if Bitcoin deceases by your Detachment Point or more - you become a holder of temporarily $0 value TVS (which is not realistic as described above)

You want to hold a portfolio of TVS for future upside

Strategy:
Buy Junior TVSs from various dates of issuance

Example:
•   Bitcoin cost $100 now, $90 tomorrow, and $120 the next day
•   Two other traders securitized their 1 Bitcoin on the first two dates above, and issued same 2 TVSs with VVS of 50%, but first TVS has FVS of $50, and second one has FVS of $45
•   You buy the first Junir TVS for $50
•   Tomorrow your TVS becomes $40 (-20% return), and you buy another Junior TVS from the second trader for $45
•   The next day your first Junior TVS becomes $60 (+20% 2-day return, +50% 1-day return), the second Junior TVS also becomes $60 (+33 1-day return)
•   In total you have spent $85, and after 2 days earned $120, meaning +41% total return, while Bitcoin increased by +20% over the same period

You want to hold a portfolio of TVS for future downside

Strategy:
Buy Senior TVSs from various dates of issuance

Example:
•   Bitcoin cost $100 now, $90 tomorrow, and $80 the next day
•   Two other traders securitized their 1 Bitcoin on the first two dates above, and issued same 2 TVSs with VVS of 50%, but first TVS has FVS of $50, and second one has FVS of $45
•   You buy the first Senior TVS for $50
•   Tomorrow your TVS remains at $50 (0% return), and you buy another Senior TVS from the second trader for $45
•   The next day your first Senior TVS remains at $50 (0% 2-day & 1-day return), the second Senior TVS remains at $45 (0% 1-day return)
•   In total you have spent $85, and after 2 days it stayed at $85, meaning 0% total return, while Bitcoin decreased by -20% over the same period

WHERE TO LEARN MORE ABOUT TVS

About Tranched Value Securities (TVS)

Tranched Value Securities Calculator

Tranched Value Securities Original Manuscript on SSRN

Lesson 1: as.exchange Tranched Value Securities (TVS) vs. Spot Trading

Happy to hear all your comments and feedback! Hope this will help you in managing risks and improving returns.

If you think this thread is worth being translated in your own local board, please do so! We will be happy to provide assistance!

DISCLAIMERS

This post is not intended to serve as advertisement or promotion of as.exchange or Alter Securities Limited, or any of their services or products, but only for educational purposes about Tranched Value Securities.

as.exchange is a trademark of Alter Securities Limited ("The Company"). The Company has filled a patent application with the World Intellectual Property Organization (WIPO) for the Tranched Value Securities™ (the “TVS™”) instrument. The current status of the patent is patent pending, therefore, any use or reference to the Tranched Value Securities™ might be subject to the local patent laws and regulars and should be done after the official approval from the Alter Securities Limited. Unauthorized use or implementation without the Alter Securities Limited consent, reference to or commercialization of Tranched Value Securities™ is subject to legal proceedings and financial penalties.

[odolvlobo]

It looks cumbersome and costly. I think that hedging with options or futures would be simpler and more cost effective as it cuts out the middle-man.

The main benefit of an MBS is that it aggregates thousands of mortgages. There is no such benefit if it is just Bitcoin.

[aesma]

I don't understand the initial pricing of the tranches. Shouldn't the senior ones cost more (for providing insurance against price decline) and the junior ones cost less (for providing more risk) ? As it is, the only way to earn with junior tranches is to buy them at a discount, so who is going to buy at the initial price ?

[as.exchange]

It looks cumbersome and costly. I think that hedging with options or futures would be simpler and more cost effective as it cuts out the middle-man.

The main benefit of an MBS is that it aggregates thousands of mortgages. There is no such benefit if it is just Bitcoin.

Thank you for reply - it’s really helpful for us to understand how people familiar with the matter view the TVS.

Answering the comment - with futures and options you can hedge the full risk of underlying asset. Like of 100% 1 Bitcoin, but with TVS, you can “cut off” the downside risk, and keep the upper part of risk/return if you wish. Furthermore, if you have a portfolio of 100 Bitcoins, it’s likely to cost you more to hedge with 100 options than having your BTC securitized and keeping the desired part of risk/return. Moreover, with options and futures you also trade them through CEX or DEX, which is the “middle-man”. As for TVS, currently it’s implemented in OTC format so the intermediary just serves to assure security of your transaction with other traders, but once more standardized TVSs are available - it will be same with options and futures - middle-man is just your trading venue.

As for the benefit of MBS, you are absolutely correct - you get diversification of credit risk, than if one of mortgages goes bankrupt, others won’t. But TVS is not intended to diversify credit risk, but market price risk. And for example while credit risk still will be there with equities and fixed-income, it’s not applicable to Bitcoin for example (it cannot go bankrupt), therefore there’s no such issue or need to diversify that risk.

[as.exchange]

I don't understand the initial pricing of the tranches. Shouldn't the senior ones cost more (for providing insurance against price decline) and the junior ones cost less (for providing more risk) ? As it is, the only way to earn with junior tranches is to buy them at a discount, so who is going to buy at the initial price ?

Thank you for spending time to read the full post above and for such a good question!

The above presented model is just the payout model of TVS, but for the pricing model - it’s still work to be done. That’s one of the reasons we expect a lot of arbitrage opportunities to exist in the market initially. Just like when options were invented and there was no generally accepted model to price them.

You are absolutely correct, based on theory - Senior TVS should cost more than the actual expected payout for the embedded “insurance”, and the Junior TVS should be sold with discount. But with current implementation on OTC - it’s up to traders what premium/discount to assign to each value tranche. Furthermore, don’t forget about such features of traditional asset-backed securities as overcollateralization, insurance for specific ABS tranches, and others (will post later all opportunities in that area). So for example, Junior TVS could be having bigger downside potential, larger upside, as compared to Senior one, but could be insured, thus becoming even more attractive for trading.

And about how to earn with Junior tranches and TVS overall, basically there are 2 options available: 1) selling your TVS to someone (common way), and 2) contract termination (where you redeem the underlying for the TVS you hold). There are other 2 traditional ways (will also post later), but these 2 are the most easy.

For us, we will be providing the initial liquidity in the market, thus would be taking positions with traders who wish to execute their trades. Overall, as you also correctly noted - if underlying doesn't decline in value after the issuance - it's just a "share" of asset (thus no benefit), but if you take into consideration the discounts/premiums which you noted, there might be significant benefits even at the very beginning of TVS issuance and people might be wanting to buy them. And, last, but not the least, people who don't have underlying (like Bitcoin), but wishing to get a cheaper exposure to upside/downside - they could be buying the Junior tranches.

[as.exchange]

Answering one of the previous questions, about how people can earn actual cash/money from their TVS position (in professional terms - derivative contract monetization or derivative position unwinding):

There are commonly 4 ways available:

•   Novation: This unwinding method assigns the trade to a third party. Under this method, the investor would receive the present value of the contract from the assignee with the original terms of the contract remaining in force. Since there is still counterparty risk with the new assignee, the original counterparty must agree to the novation. This is effectively a selling of the initial contract to a third party through the platform.
•   Contract termination: The easiest unwinding method would be for the counterparty to agree to terminate the contract. To do so, the seller would transfer the present value of the contract to the contract buyer. This transaction assumes that the contract will last until maturity without a credit event occurring. This assumption is, of course, unrealistic since a default is still possible. Therefore, to account for the positive probability of default, the present value is calculated with a discount rate that reflects credit risk. This is effectively a selling of the initial contract to the platform with discount to market price.
•   Taking offsetting position: This method involves entering into an offsetting position with another counterparty. To perfectly hedge the remaining cash flows, the investor needs to sell a contract which is netting all payouts and potential returns to zero. This is effectively a purchase/sale of offsetting contract from another investor.
•   Marked-to-market: An accounting method that records the value of an asset according to its current market price. M2M pricing accurately reflects the true value of an asset. In Mark-to-Market accounting the asset values are determined according to market prices at the end of each day in order to arrive at the profit or loss status of the parties in a futures transaction. In futures trading mark-to-market is also known as daily settlement. In mark-to-market the profit or loss of the contract is realized at the end of each trading day. This mark-to-market prevents the accumulation of losses beyond the point of affordability by the losing party and helps the clearing house reduce its risk of guaranteeing the performance of every futures contract. This is effectively an exchange of cash to settle daily losses/profits, thus if one user earns $10 on a position, its counterparty must lose $10 on the same position, thus net cash flows net to zero. Such system implementation is possible only with full-fledge exchange market, not an OTC platform.

[as.exchange]

Not sure if this should be posted here as a message, or the original post should be updated, thus for now will add here as comment to previous question.

How Tranched Value Security (TVS) can be further adjusted to even more transform underlying performance

TVS could potentially be issued on any asset, liability, equity, interest rate, exchange rate, market index, notional value or any other instrument, which has an assessable market value or price, with publicly traded securities being the easiest ones to deal with. TVSs can be issued with varying the initial issuance parameters, such as VVS or FVS. While the higher value share would represent less risk for the potential security buyers, and a smaller value share could significantly improve returns although amplifying the corresponding risks, which all together affect AP and DP in TVS.

Internal value enhancement mechanisms

•   In the presented above examples, it was assumed that at issuance: VVS * Spot Price = FVS, however, that is not a mandatory requirement, and they can be different, transforming the performance of underlying even further.

•   Also, it was assumed that VVS and FVS are fixed parameters in time, however, they can be floating and be attached to specific benchmark (like floating-rate swaps), specific rules (like barrier options), or specific events (like catastrophe bonds).

•   Moreover, it was previously assumed that TVSs with equity underlying and cryptocurrencies are perpetual in nature, they in fact could have maturity dates (like with futures and options), changing equity/cryptocurrency instrument in some cases to the fixed-income securities in payout structure (later will post case studies on that). The opposite can be done with TVSs with debt as underlying by rolling the TVS issuance in new debt with the same characteristics as the original one, thus transforming the initial bond into fixed-income equity or perpetual fixed income.

•   Another possible modification of TVS is the issuance with separate groups of underlying. For example, one issue of TVS could have the bond’s face value as underlying, while another TVS issue could have bond’s coupons as underlying. Same applies to equity and corresponding dividends, which would enhance performance of some value tranches on the expense of others.

•   Moreover, TVS could be issued with option, forward or swap-like terms, whereas one type forces the execution of value tranche on a specified future date, another one gives a right to execute the contract on or before the specified maturity, and swap forcing the exchange of differences in periodic values instead of the notional value exchange. Option-like TVSs can be similar to options in terms of giving a right to buy or sell a specific value share of underlying. Tranched Value Securities can be further be modified and issued on existing TVS (TVS-Squared), making them similar to Credit Default Swaps Squared (see above IMF's diagram), where a particular value tranche is backed by a number of specific value tranches in other TVSs.

Furthermore, some of the traditional credit enhancement mechanisms can be applied (well-known in securitization practice), such as:

•   Overcollateralization - with this support structure, the value of the underlying asset is larger than the security it backs (like $100 TVS backed by $120 BTC value), thus the issued security is overcollateralized. In this manner, even if some of the market value gets distorted to the limited extend, portion of it can be restored without TVS obtaining $0 value.

•   Reserve account - created to reimburse the issuing TVS for losses up to the amount allocated for the reserve. To increase value support, the reserve account could be non-declining throughout the life of the security, meaning that the account will increase proportionally up to some specified level as the outstanding value gets claimed by TVS holders.

External value enhancement mechanisms

•   Surety bonds - insurance policies (usually from external party) that reimburse the TVS for any or specific level of losses.

[as.exchange]

Here's one example about how that would work in real life with equity as underlying:

Assume that you issue TVS securities backed by General Electric Ordinary Common Stock (NYSE:GE) as underlying. For the purpose of analysis GE monthly performance for the period of 01/01/2007-01/12/2017 was used.

It is assumed that five Tranched Value Securities (TVS) were issued with GE as underlying on 01/01/2007 when the opening price for GE was $37.41, with the following characteristics:


- NYSE:GE [GE] is underlying asset with opening price of $37.41 on 01/01/2007, which serves as price index for the below TVSs

- GE TVS Senior [GETVS-A] has VVS 30% of and FVS of $11.22 on 01/01/2007
- GE TVS Subordinated [GETVS-B] has VVS 25% of and FVS of $9.35 on 01/01/2007
- GE TVS Junior [GETVS-C] has VVS 20% of and FVS of $7.48 on 01/01/2007
- GE TVS Mezzanine [GETVS-D] has VVS 15% of and FVS of $5.61 on 01/01/2007
- GE TVS Equity [GETVS-E] has VVS of 10% and FVS of $3.74 on 01/01/2007

Each subsequent TVS is more junior to the higher-ranked one, implying it can claim any value only if the more senior TVS was satisfied.

Based on the above, the following results can be obtained illustrating the performance of Tranched Value Securities as compared to underlying asset performance (GE):










As you can see from above data, the performance of TVS backed by the same GE has been significantly transformed.

[as.exchange]

Here's one example about how that would work in real life with fixed-income as underlying:

Assume that you issue TVS securities backed by APPLE INC. DL-NOTES 2013(13/23) WKN A1HKKX | ISIN US037833AK68 as underlying, that were issued on 07/05/2013, have a maturity on 03/05/2023, and pay a coupon of 2.4% on semi-annual basis. For the purpose of analysis daily performance for the period of 07/05/2013-12/12/2018 was used.

It is assumed that five Tranched Value Securities (TVS) were issued with APPLE INC. DL-NOTES 2013(13/23) WKN A1HKKX | ISIN US037833AK68 as underlying on 07/05/2013 when the opening price was US$ 99.19 for each US$ 100.00 of security’s face value, with the following characteristics:

- APPLE INC. DL-NOTES 2013(13/23) WKN A1HKKX [ISIN US037833AK68] is underlying asset with opening price of $99.19 on 07/05/2013, which serves as price index for the below TVSs

- AAPL TVS Senior [AAPLTVS-A] has VVS 30% of and FVS of $29.76 on 07/05/2013
- AAPL TVS Subordinated [AAPLTVS-B] has VVS 25% of and FVS of $24.80 on 07/05/2013
- AAPL TVS Junior [AAPLTVS-C] has VVS 20% of and FVS of $19.84 on 07/05/2013
- AAPL TVS Mezzanine [AAPLTVS-D] has VVS 15% of and FVS of $14.88 on 07/05/2013
- AAPL TVS Equity [AAPLTVS-E] has VVS of 10% and FVS of $9.92 on 07/05/2013

Each subsequent TVS is more junior to the higher-ranked one, implying it can claim any value only if the more senior TVS was satisfied.

Based on the above, the following results can be obtained illustrating the performance of Tranched Value Securities as compared to underlying asset performance (ISIN US037833AK68):







As you can see from above data, the performance of TVS backed by the same ISIN US037833AK68 has been significantly transformed, in some cases making junior value tranches of bond perform in the similar manner as if it was an equity instrument.

[as.exchange]

Dear BitcoinTalk Community, we are pleased to present our explainer video about Tranched Value Securities (TVS).

We hope it will help you to understand a bit more the concept described above in the lengthy text, and hope everyone and everywhere can benefit from the financial innovation! We would highly appreciate your comments and opinion on this. Feel free to ask any questions

Link to the video: https://youtu.be/cS5xjcBhqqs