In practice, structured investment vehicles (SIV) are mostly issued or managed by internationally renowned big banks, just like MBS (mortgage-backed securities) of subprime mortgages. But at first, in order to consider risks, most of them set up another company and then set up a management fund. Then, banks use their own good credit endorsement to enable these companies to issue commercial bills in the market, obtain low-interest-rate cost funds at the interbank interest rate (usually LIBOR interest rate), and then invest these funds in medium-and long-term bonds with higher interest rates and which they think are safer, so as to earn long-term and short-term spreads.

This practice is actually different from the principle that general fixed-income departments buy long-term bonds and subdivide them, and the market uses bonds as financing funds (RP, repurchase). The main difference is that RP means you buy bonds and then lend them to others, while SIV means you borrow money and expect the bonds you buy to rise. The two directions are different, which also leads to opposite market risks.

Because SIV makes long-term investment through short-term borrowing, in other words, the borrowing part will expire before the investment part. Therefore, this commodity bears the risk of liquidity from the beginning of design. Generally, CP expires from ten days to one month, and bonds expire from 1 to 10 years. In other words, if a SIV management company buys one-year bonds by issuing one-month CP financing, in fact, there has been a surplus of funds in the market in recent years, which I believe is why banks still dare to rush forward and reinvest later.

For SIV, another risk is the risk of default, that is, the risk that the purchased bonds will not be repaid after maturity. In fact, this is exactly why SIV is concerned this time. If SIV just bought high-security US Treasury bonds today, the problem should not be very serious (but it will not be very big, because the spread is not big). The main reason is that they use these funds to invest in MBS closely related to mortgage loans. Originally, SIVs were required to invest only in AAA-rated bonds, but as I mentioned in the reason of "subprime mortgage" before, these MBS also cleverly packaged MBS into AAA-rated CDOs, so that these SIVs could invest smoothly. Therefore, SIV is very natural when the market is quarreling over MBS.