METHOD AND SYSTEM FOR PROVIDING MANDATORILY CONVERTIBLE SECURITY WITH ASSOCIATED CALL SPREAD AGAINST TRUST

摘要

PROBLEM TO BE SOLVED: To provide a method and a system related to a structured financial commodity and particularly used for offering mandatorily convertible securities such as ordinary stock convertible bonds.

SOLUTION: This method and this system are used for offering novel mandatorily convertible securities (e.g., DECS) by using a third party entity (either a corporate entity or a newly-formed independent trust). As compared to a traditional DECS, the use of the third party intermediary allows the first entity to: (1) recognize an accounting gain/loss on its underlying position related to management of the second entity up front on the day of sale of the novel DECS; (2) avoid the creation of debt on the balance sheet of the first entity; (3) avoid any mark-to-market accounting through the income statement for each fiscal quarter, which would produce income statement volatility.

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