Workshop on Mortgage-Backed Securities

Prof. Ian Giddy
New York University

Outline Market Articles
Slides Links MBS

Asset Securitization
Asset-backed securities constitute a growing segment of the US and global capital markets. The asset securitization technique, while complex, has won a secure place in corporate financing and investment portfolios because it can, paradoxically, offer originators a cheaper source of funding and investors a superior return. Not only does securitization transform illiquid assets into tradable securities, but it also manages to transform risk by means of the separation of good financial assets from a company or financial institution with little loss of revenue. The assets, once separated from the originator, are employed as backing for high-quality securities designed to appeal to investors.

For more details see the instructor's website,


Ian Giddy has taught finance at NYU, Columbia, Wharton, Chicago and in 30+ countries abroad for the past two decades. 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, he has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous corporations and financial institutions in the U.S. and abroad. 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 Securitization in Asia and The Hudson River Watertrail Guide.

Prof Ian Giddy
Stern School of Business
New York University
44 West 4th Street
New York, NY 10024

  The Workshop

This workshop examines the structure and process of asset securitization and the merits of this technique for investors. The emphasis is on understanding the benefits, costs and risks from the issuer and investor viewpoints, how the rating agencies look at ABS risks, and how successful deals must be structured. Special attention is given to mortgage-backed securities, although the workshop looks at a number of different asset classes and structures, in the USA, Europe, and Asia. 

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 and plenary discussions. 

Outline of Workshop

Financing with Asset Backed Securities

  • Introduction and update on the global ABS market

Managing the Legal and Tax Aspects

  • Typical ABS structure and process
  • Key legal requirements
  • True sale aspects
  • Case study: Ford Credit Auto Owner Trust
  • Synthetic ABS
  • Nature of special-purpose vehicles
  • Independence and bankruptcy issues
  • Revolving pool ABS and the soft bullet repayment structure
  • Master trusts: how they work
  • Comingling risk and related issues
  • Case study: Mound Financing

Home Loan Securitization

  • How mortgage securitization works: international comparisons
  • Access to new sources of finance – bank and non-bank
  • Two-tier structure of mortgage-backed securities
  • Case studies: FannieMae MBS and REMIC
  • Effect on cost of borrowing for mortgage holders
  • Issues of securitization and banking regulations

Managing the Credit Risks

  • Pool and structure analysis
  • Getting a rating – the process and the criteria
  • Credit enhancement: alternative approaches
  • Credit Analysis of Mortgage-Backed Securities
  • Case study: Liberty NZ 2005-1. We examine this residential MBS structure to find the drivers of credit enhancement and ratings transition.

Managing Prepayment Risk

  • Pro-rata pay-through mortgage-backed securities
  • Analyzing paydown and prepayment patterns
  • The CPR and prepayment assumptions
  • The option component
  • Case study: Canada Enhanced Homes Trust 1. By modelling the cash flows in a securitization, delegates estimate the payback and funding cost structure of a residential mortgage-backed security.

Commercial Mortgage Securitisation

  • How commercial mortgage securitisation differs from RMBS
  • Case study: Wachovia CMBS
  • Credit analysis of CMBS
  • Techniques of credit enhancement
  • Effect on cost of borrowing for mortgage holders
  • Access to new sources of finance

New Developments in Mortgage Securitisation

  • Single property securitization (case study)
  • Securitization and credit derivatives (case study)
  • Managing a mortgage portfolio (case study)

    Recap of the Workshop

The Market Useful ABS Articles Case Studies and Deals Workshop Slides Useful Websites

Other resources on asset-backed securities: 
Mortgage-Backed Securities:

ABS seminars conducted by Ian GiddyPowerpoint presentation documents
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