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Chimera Investment Corporation Message Board

  • roderickb99 roderickb99 Feb 23, 2010 7:59 PM Flag

    CIM website on financing. Leverage.


    We use leverage to increase potential returns and to fund the acquisition of our assets. Income is generated primarily by the difference, or net spread, between the income we earn on our assets and the cost of our borrowings. We may finance our investments using a variety of financing sources including repurchase agreements, warehouse facilities, securitizations, commercial paper and term financing CDOs.

    Our results depend on, among other things, the level of our net interest income, the market value of our assets, and the supply of and demand for such assets. We may hedge our exposure to potential interest rate mismatches between the interest we earn on our investments and our borrowing costs caused by fluctuations in short-term interest rates. We utilize derivative financial instruments, including, among others, interest rate swaps, interest rate caps, and interest rate floors to hedge all or a portion of the interest rate risk associated with the financing of our portfolio. In utilizing leverage and interest rate hedges, our objectives are to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a spread between the yield on our assets and the cost of our financing.

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