SIVs raise funds by ______ and then use the proceeds to ______.

Question

Quizplus · Accepted Answer

SIVs raise funds by issuing short-term commercial paper and then use the proceeds to buy other forms of debt such as mortgages. This allows for leverage and potentially higher returns, but also carries greater risks in the event of market disruptions. Option A, which involves retiring other forms of debt, may not make sense for funds whose goal is to increase returns through leverage. Option C and D, which involve issuing long-term bonds, do not accurately describe the funding strategy of SIVs.

SIVs Raise Funds by ______ and Then Use the Proceeds