Research On Innovation Of Structured Trust For Securities Investment

Structured trust for securities investment is basically a kind ofstructurized trust investing securities, by which posterior beneficiaries applytheir trust benefits expected in non-structured trust to guarantee anticipatedtrust benefits of prior beneficiaries, and prior beneficiaries correspondinglyapply with their trust benefits expected in non-structured trust asconsideration of such guarantee. Although structured trust for securitiesinvestment, involving leveraged investment to satisfy various investmentrequirements, consumedly increases potential investors of securitiesinvestment trust, actually many market requirements have not yet beensatisfied. Therefore, this paper tries to define a full-function structured“Umbrella Trust”, with purpose to make up disadvantages of ordinary structured trust, satisfy latest investment requirements and resolve diverseproblems in commercial practice.The first three chapters of this paper describe the foundational theory ofstructured trust, explore the commercial model and principles of structuredtrust for securities investment, and furthermore define the application rulesof the “Shanghai Model” with the acquisition of the foundation of theory ofthis paper.In the fourth chapter, this paper makes a comparison betweenstructured trust for securities investment and margin financing business.Comparing with margin financing business, structured trust has a lot ofadvantages, but meanwhile it has a lot of disadvantages such as high limit offinancing scale, long financing terms for trading investors, too diversifiedsecurity portfolios, low efficiency of implementation, etc. As a result of suchshortcomings, present structured trusts for securities investment can notcompletely satisfy market requirements. The fifth chapter of this paperprovides innovative structure of trust,“Umbrella Trust”, in order to resolvethe aforementioned problems and involve the “subordinate beneficiaries” tosolve the discrepancy in the aspect of preference for liquidity between priorbeneficiaries and posterior beneficiaries. The analysis about “UmbrellaTrust” in this chapter specifies the basic structure of “Umbrella Trust” which is combined of master trust and its multiple subsidiary accounts, the role andresponsibility of every party, setting of the “stop-loss” line, calculating netvalue of various types of trust units, and the method for distribution of trustbenefits.This paper provides solutions on three key issues in the6th,7th and8thchapters concerning ratio and pricing of “subordinate trust units”, the“stop-loss line” of subsidiary accounts, as well as ruling and regulation overthe innovative full-function trust. For the first issue, this paper researches inpricing of structured derivatives and structured trusts by means ofno-arbitrage analysis and option pricing, and further analyzes ratio andpricing of “subordinate trust units”. For the second issue, this paper clarifiesthe practical hypothesis and the steps of calculating the “stop-loss” line, andthen discusses it in two situations: investment in one stock and in stockportfolios. Regarding the third issue, this paper explores the legal problemsprobably involved in the innovative full-function trust to control the legaland regulatory risks, such as breakthrough of the diversification principle,control of illegal and abnormal dealing, mixture of assets under differentsubsidiary accounts, etc.