First, a reference portfolio is constructed
Second, Paulson buys protection on the 45%/100% tranche (super senior) from Goldman Sachs, this is a bilateral trade with nothing to do with the Abacus SPV other than using the same reference portfolio.
This leaves Goldman Sachs short protection on the 45%/100% tranche.
Third, Goldman Sachs sells notes to IKB ($150 milion) and ACA ($42 million) => this leaves Goldman Sachs long protection (via purchase from the Abacus SPV) on the notes notional and short protection on the 45%/100% tranche.
Notes sold are well below what was expected in the “flipbook”.
Fourth, post-deal closing Goldman Sachs sells its long protection on the notes (acquired from the Abacus SPV) to Paulson => this puts back Goldman Sachs as short protection on the 45%/100% tranche
Fifth, more than a month after the deal closing, Goldman Sachs buys protection from ACA (through ABN/AMRO) on the 50%/100% tranche, this a bilateral trade with nothing to do with the Abacus SPV other than using the same reference portfolio => this leaves Goldman Sachs short protection on the 45%/50% tranche (5% of total notional).
The ACA deal (50% to 100% = 50%) is for $909 million notional, which implies a total notional of $1.8 billion for the deal, also below the level announced in the “flipbook”.
A pesar de llamarse Abacus for Dummies, Felix Salmon hace un mejor trabajo simplificando el tema:
Simplifying Alea even further, we have five steps here:
- The reference portfolio is put together.
- Goldman sells super-senior protection, Paulson buys it.
- IKB and ACA sell senior protection, Goldman buys it.
- Goldman takes the senior protection that it bought from IKB and ACA, and sells it on to Paulson.
- Goldman buys super-senior protection from ACA, through ABN Amro.
Update: A medida que hay más información, se ofrecen mejores análisis sobre los hechos:
Desconstructing Abacus de Interfluidity
Goldman Abacus illustrated de Bionic Turtle