structured investment vehicle

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An arbitrage fund that raises finance by selling asset-backed commercial paper (CP) and medium-term notes and invests predominantly in asset-backed securities (ABSs). The SIV makes its profit from the difference between the short-term rate paid to the holders of CP and the longer-term rate earned on the ABSs (see playing the yield curve). Most SIVs are managed by banks or other major institutions.

Subjects: Financial Institutions and Services — Accounting.

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