Regulations are making trade finance CDOs more attractive, but recent press buzz surrounding the market's potential appears to be overhyped and maybe a little amnesic.

Trade finance is broadly defined as the capital that is necessary for the international flow of trade and it can take many forms. One common instrument is a bank-issued letter of credit, which could be used by an importer to guarantee that its payment will be received by an exporter on time and for the correct amount. Exporters and importers also use short-term bank facilities to lubricate the trade of goods.

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