Structuring is a function that sits between Sales and Trading in a typical investment bank. These days its role is becoming closer and closer to coming up with tailor-made solution for clients rather than coming up with fancy structures that it used to be.
There might be two types of clients based on their needs and hence the structures are also classified based on this. There are those corporates who have issued a bond or some other investment vehicle to the investors and expected to make regular cash flows to them. So, they are 'liable' to pay to the clients. These 'liabilities' may be affected by interest rate changes or currency movements or even inflation. When the Structuring Desk in the bank provides solution to hedge these 'liabilities', the structures are said to be 'Liability-Side' Structures.
Similarly there are those clients of the bank who have actually invested in these bonds or other instruments that the various corporates or governments offer. They are expecting cash flows from holding these 'assets'. Again these cash flows might have exposures to interest rate changes or currency movements or inflation or commodity prices, can be anything. They would come to the bank looking for a solution to hedge these exposures. The structures provided by the Structuring desk in this case are called 'Asset-Side' Structures.
Typically there would be more Liability-Side hedges to be provided rather than asset side hedges as the issuers of these bonds want more protection. Investors typically invest in the things they want exposure to and hence they would be less frequent to go about looking for hedges.
There might be two types of clients based on their needs and hence the structures are also classified based on this. There are those corporates who have issued a bond or some other investment vehicle to the investors and expected to make regular cash flows to them. So, they are 'liable' to pay to the clients. These 'liabilities' may be affected by interest rate changes or currency movements or even inflation. When the Structuring Desk in the bank provides solution to hedge these 'liabilities', the structures are said to be 'Liability-Side' Structures.
Similarly there are those clients of the bank who have actually invested in these bonds or other instruments that the various corporates or governments offer. They are expecting cash flows from holding these 'assets'. Again these cash flows might have exposures to interest rate changes or currency movements or inflation or commodity prices, can be anything. They would come to the bank looking for a solution to hedge these exposures. The structures provided by the Structuring desk in this case are called 'Asset-Side' Structures.
Typically there would be more Liability-Side hedges to be provided rather than asset side hedges as the issuers of these bonds want more protection. Investors typically invest in the things they want exposure to and hence they would be less frequent to go about looking for hedges.
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