what is VIE? what are the main differences between VIE and SIV?

They are totally different, an SIV is (in general) an example of a VIE, but SIV is a finance term, VIE is an accounting term.VIE = Variable Interest EntityThis is an accounting term that (ASAIK) only applies under US accounting, in relation to FIN 46(r), although analogies exist in other countries. A VIE is a company (usually an SPV - special purpose vehicle - a company with no staff or tangible assets etc, with restricted operation - a fund - often offshore) where the usual consolidation rules don't apply. This is because the control and interest in the company are not held by the equity voteholders - the equit votes are constrained. For most SPVs the equity may be literally $500 which will be given to a charity and just sit there doing nothing. The control will be given to a security trustee, who will advise the directors, and investment advisor and possible admin advisors will be contracted to advise the trustee. The bulk of money in the SPV then comes from various other investors, who take different positions in the structure - "equity", "mezz", "senior" etc - where equity here is used in the CDO type sense and not the legal sense. Since the charity owns all $500 of the equity, normal accounting would call for consolidation of the SPV as a subsiduary. THis would be stupid. Instead the SPV is reckognised as a VIE - the interest in the company is variable - hence the name. It is then the task to determine if any of the investors holds "the majority of the risk and reward" of the vehicle. For most vehicles this means that the "CDO type" equity holds the majority of the risk and reward, and so it would be syndicated amongst different investors, none of which consolidate. In some cases the Mezz may also take a large part of the risk/reward and hence so long as a different investor takes the mezz and the equity, no-one consolidates.The point of a VIE is to produce a mechanism that keeps the assets off balance sheet. VIEs include SIVs, Conduits, CDOs, CDPCs, CPDOs and some funds. Basically any off balance sheet financing for a company.SIV = Structured Investment VehicleThis is a specific strategy for making (or losing money), the VIE/SPV is the legal framework used. An SIV purchased long dated AAA/AA ABS and AA/A financial paper, supported by capital notes (first loss) and short term MTN/CP funding usually at a ratio of around 1:14. The idea was the the highly rated debt being purchased was safe, but that the maturity date was uncertain. The senior funding would be continually rolled as a natural hedge to extension risk (since it is all floating debt) and the spread between the long dated ABS and the short dated CP would be levered and paid to the capital note holders. The leverage part is similar to a CDO, however the rolling short term funding makes them more similar to a bank (particularly NR!), and they even ran capital requirement calculations (which the capital notes had to cover). When these capital requirements were not met, the ability to fund dried up and they followed NR.