UBS structures second Alpine risk capacity ‘enhancer’

UBS has enhanced the credit risk capacity in its derivatives trading book by E1.5 billion, through an innovative managed securitisation issued in early April. The so-called Alpine II structure, based on the description of its reference pool and the ratings applicable, could save the bank between 20% and 30% of the cost of using single-name credit default swaps. It is aimed at freeing UBS’s credit limits to enable the bank to trade more derivatives volumes with key business clients, the bank claims.

The deal draws on UBS’s experience in developing Alpine I, conceived by the bank in mid-1999. That 10-year amortised transaction, which closed in December 2000, also took a portfolio of the bank’s investment-grade credit counterparty risk from its derivatives trading book. This was structured into different risk/reward tranches that were sold to investors. That issue transferred $750 million of counterparty exposures from UBS’s foreign exchange and interest rate derivatives contracts.


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