A credit linked note is a security created through a special purpose company or The term trust has several meanings: In sociology, trust is willing acceptance of one persons power to affect another. It is discussed more formally in the articles on social capital, profession and authority. There is much dispute on whether degrees of trust can be measured, or whether it simply... trust, designed to offer investors par value at maturity unless a referenced credit Default is the name of a number of quite different concepts. Typically, default means what happens if no action is taken. It is also the name of a band. See: Default (law) Default (finance) Default (computer science) Default (tennis) Default (band) This is a disambiguation page — a navigational aid... defaults. In the case of default, the investors receive a recovery rate.

The trust will also have entered into a default swap with a dealer. In case of default, the trust will pay the dealer par minus the recovery rate, in exchange for an annual fee which is passed on to the investors in the form of a higher yield on their note.

The purpose of the arrangement is to pass the risk of specific default onto investors willing to bear that risk in return for the higher yield it makes available. The CLNs themselves are typically backed by very highly-rated collateral, such as U.S. Treasury Securities are bonds issued by the U.S. Federal Reserve. They are debt finance instrument of the Federal government. There are four types of treasury securities. They are Treasury Bills, Treasury Notes, Treasury Bonds, and Savings Bonds. All of the treasury securities besides Savings Bonds are very liquid. They... Treasury bonds.

The Italian dairy products giant, Parmalat SpA, an Italian dairy and food company and Europes biggest dairy company, was declared bankrupt in late 2003. Its worldwide operations include almost 140 production centers. Over 36,000 workers around the world collect Parmalat pay packets, and 5,000 Italian dairy farms are dependent on the company... Parmalat, notoriously dressed up its books by creating a credit-linked note for itself, betting on its own credit worthiness.