Hello everyone,
Does anyone know how a bank makes money when they issue CLNs to clients? I am not talking about the hedging of debt by the bank. I’m talking about the structured products that bank offer. Does the money come from the difference between the coupon paid to the investor and what the bank get from the spread on sale of the CDS + the coupon received on the collateral? That is, if the bank gets 5% from the CDS and 2% from the collateral, the bank will pay the CLN investor only 6% and keep 1%? Is it how it work or I am totally wrong? Thx a lot