Enhanced Yields

Blockchain-powered Collateralized Reference Obligation™ (CRO) bonds pay negotiated coupons and globally diffuse risk through dynamic risk pooling.

The ultimate result is deep purchase discounts and enhanced post-claim yields.

Managed-Risk Securities

CRO bonds are investment-grade fixed-income securities in which the compensation risk of its linked Default Compensation Receipt™ (DCR) has been embedded.

All CRO bonds:

  • Are competitively negotiated and originated within the all-to-all DelphX® market
  • Pay a negotiated fixed coupon over negotiated fixed tenors
  • Are fully collateralized at all times
  • Enable the holder to either retain the embedded compensation risk of the linked DCR or transfer it to the Quantm™ Risk Pool
  • Are transparently administered in the blockchain-powered distributed ledger integrated within DelphX
  • Are immediately eligible upon origination for secondary trading on DelphX
  • Are continuously benchmark priced through validated MAVn® pricing forecasts.

 

Bespoke Origination

New CRO bonds are anonymously structured by the competitive interaction of potential purchasers of the CRO and the purchaser(s) of the pending DCR to which it will be linked. Thus the entry of a new buy order into the DCR order book for a given issue will trigger the automatic entry of two sell orders for the CRO required to fund the collateral of the pending DCR.

One of the sell orders will detail the terms for the non-pooled (full-risk) version of the pending CRO and the other will detail the terms of the pooled risk CRO. As indicated below, pooling of the embedded compensation risk materially discounts the purchase price of the pooled-risk CRO–which increases the effective yield of the bond. Given the lower risk and resulting lower collateral requirement and purchase price of a pooled risk CRO, it is anticipated that most participants will elect to pool their risk.

Anonymous Negotiation of New DCR and Linked CRO

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A new buy order for a DCR triggers two sell orders for the offsetting CRO, one for the non-pooled full risk version and the other for the pooled risk version.

Pooling-Enhanced Yields

Transferring the compensation risk embedded within a CRO to the Quantm Risk Pool enables holders to reduce their percentage of exposure from 100% to a small and continually reducing percentage of the collective compensation risk within the hundreds (and eventually thousands) of CROs included in the risk pool.

The lower risk produced by pooling is conveyed by Quantm to CRO holders through spread-based purchase discounts. The table below shows the purchase prices resulting from each displayed DCR spread, and the higher post-claim yields created by pooling CROs.

Post-Claim CRO Yields (Assuming 4.0% Annual Risk-Pool Loss Ratio)

chart-post_claim_CRO_yields.jpg

Pooled risk results in spread-based purchase discounts, which can translate into higher post-claim yields.

A Better Bond Market

DelphX_Whitepaper_thumb.jpg Default risk is too concentrated. The market is nontransparent. Too few issues can be protected. DelphX addresses these problems, providing guaranteed credit protection, deeper market liquidity and enhanced investor yields.

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