The Course
Asset-backed
securities
constitute a growing and complex segment of the global capital markets
and have
become widely employed in developing countries as
well as developed countries. This course provides a brief insight into
the techniques of
securitization and structured credit risk transfer. In addition to
covering new developments in collateralized debt obligations, the
course explains consumer finance securitisation and related topics. It
explains risk transfer using synthetic
asset securitisation, a versatile and
fast-growing technique in the ABS market. The couse offers participants
the
opportunitiy to explore a variety of legal and cashflow structures, and
of credit enhancement.
Method and Materials
The workshop will include
case studies of actual deals, as well as hands-on
exercises, and will give participants the opportunity to demonstrate
their
understanding of deals through group interaction and workshop
discussions. Participants
will be
provided with a package of materials useful to the structuring and
analysis of synthetic asset-backed deals, including pertinent articles,
rating agency reports and sample documentation from actual
deals done in the US, Europe and elsewhere.
Pre-Course Reading
Issues
to be Discussed
- Where
is the asset-backed securities market headed?
- What
are the key legal and regulatory issues in the asset-backed market
today, and how are they addressed in different forms of ABS?
- What
drives credit ratings on ABS, and how is credit enhancement achieved?
- What
is special about consumer finance securitization?
- How
can one evaluate different collateralized debt obligations
(CDOs)? How are they structured?
- How
can one calculate the required credit enhancement for different
tranches backed by a pool of assets?
- What is
the connection between synthetic asset-backed securities and the
markets for
credit derivatives?
Securitization
Workshop: Agenda
Topics
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Resources
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Asset-Backed
Securities Explained
- The state of the
market
- Getting an ABS deal
to market
- Case
study: Finance Company Bhd. We review the
process, structure and cash flows of this deal
- Credit enhancement
- Tiering the funding
structure
- Cash flow analysis
and pricing
- Key legal
prerequisites of ABS today
- Case study: Ford Motor Credit. What
is
the legal status of this securitization? Is it a true sale? Is the SPV
independent?
- Pool analysis,
structure analysis, and determinants of credit risk
- The technique of
credit enhancement
Consumer Finance ABS: Risk
Assessment and Credit Enhancement
- Pool analysis,
structure analysis, and determinants of credit risk
- Consumer finance
securitisation
- Case study: Red and Black. How do
these work? What
is
the credit exposure? What
happens when credit deteriorates?
- Counterparties and
servicer risk
- Interest rate and
liquidity risk
- The technique of
credit enhancement
- Case study: Chase Credit Card
Securitization. How would you assess the credit risk in this
deal? What are the other risks? What protections do investors have?
- Rating agency
analysis: stress testing approach
- Application: Madras
Appliances: post-acquisition ABS
The Rating Agency Process
- What ratings mean in
the ABS world
- Models rating agencies use
- The technique of
credit enhancement
- How to structure the credit
enhancement for an ABS
- Using ratings loss tables to
structure credit enhancement in ABS
- Developing a senior-sub model
- Analysis of a portfolio with a rating
agency model
- Getting a rating:
sequence and requirements
- Application: FleetLease Turkey
Special Applications: ABCP, CDOs
and Synthetics
- Asset-Backed Commercial Paper
- Special role of bank in ABCP
- Where can TII use ABCP?
- Classic
ABS vs Collateralized
Debt Obligations
- Cash flow versus market value CDOs
- CDO credit enhancement and ratings
- Case
study: Atrium. What are the
assets in this CDO deal, and how are they funded?
- Rating CDOs: factors considered by
the rating agencies
- Tiering the
liabilities of a CDO
- CDO pricing and cash flow
analysis
- Using ratings loss tables to
structure credit enhancement in ABS
- What
are "synthetic" ABS?
- Synthetic
ABS and the market for credit derivatives
- How
credit
derivatives work -- and how they are priced
- Funded and
partially funded synthetic CDOs
- Case study: Synthetic
Securitisatoin. Analysis of the
structure, pricing and risks of a synthetic CDO with a super-senior
tranche.
- Credit
and
regulatory issues relating to synthetics
Summary
and Conclusions
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Presentations
tii-abs_intro.pdf
tii-consumer.pdf
tii-ratingprocess.pdf
tii-cdo.pdf
Case studies
Finance
Co. Bhd
Ford
Motor Credit 2006
Red
& Black
Chase
Credit Card ABS
Madras Appliances ABS
FleetLease Turkey
Atrium
Noname
Bank Synthetic CLO
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Workshop
Instructor
Ian Giddy is
on the faculty of finance at New York University, USA. He has taught
finance at NYU, Columbia,
Wharton, Chicago and abroad for the past thirty years. He was
Director
of International Fixed Income Research at Drexel Burnham Lambert from
1986
to 1989. The author of more than fifty articles on international
finance,
Dr Giddy has served at the International Monetary Fund and the U.S.
Treasury
and has been a consultant with numerous financial institutions and
corporations
in Europe, North America, the Middle East and Asia. He has lectured in
more than forty countries, and has been involved in the asset-backed
securities market for over 15 years. He is the author or co-author of
The
International
Money Market, The Handbook of International Finance, Cases
in International Finance, Global Financial Markets, Asset
securitisation in Asia, and The
Hudson River Watertrail Guide. He and his
wife are the founders of Cloudbridge, a nature reserve in Costa
Rica.
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