What the Course is About
constitute a growing and complex segment of the global capital markets
become widely employed in developing as well as developed countries.
This course provides an in-depth insight into the state of the art in
securitization, as well as the broader field known as structured credit risk transfer --
funded asset-backed securities, synthetic securitization, credit
derivatives, and more. In addition to
covering new developments in collateralized debt obligations, the
course explains whole business securitization and related topics, and
the growing market for commercial as well as residential
mortgage-backed securities. It explains risk transfer using synthetic
asset securitization, a versatile and
fast-growing technique in the ABS market. It opens new possibilities
for the transfer,
pricing and management of credit risk. Commercial
mortgage-backed securities, a growing sector, offers delegates the
opportunity to explore a variety of legal and cash flow 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
understanding of deals through group interaction and workshop
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, South Africa and elsewhere.
Who Should Attend?
workshop will prove informative to all involved in asset-backed
securities and corporate finance. It includes material of relevance to commercial
lenders and investment
and investors in asset-backed securities. Also credit specialists;
securities analysts; investment officers and fund managers; legal
individuals whose professional future may be enhanced by an
of synthetic and other advanced securitization techniques.
to be Discussed
is the asset-backed securities market headed? What is the impact of the
are the key legal and regulatory issues in the asset-backed market
today, and how are they addressed in different forms of ABS?
can one evaluate different synthetic collateralized debt obligations
(CDOs)? What drives their ratings?
- What is
the connection between synthetic asset-backed securities and the
credit derivatives and leveraged finance?
is the role and pricing of the super-senior tranche of some synthetic
are the key risks in mortgage securitization? What
are covered bonds?
methods are used in commercial mortgage-backed securities? How do they
differ from residential MBS?
- Why is the synthetic approach used in many residential and
commercial mortgage-backed financings?
does "whole business" and "future flow" securitization work?
- The state of asset
securitization: surviving a disrupted market
- The ABS process:
getting a deal
study: Finance Company Bhd. We review the
process, structure and cash flows of this deal
- Credit enhancement
- Tiering the funding
- Key legal
prerequisites of ABS; rating and regulatory bodies
- Team Exercise: Hyundai Auto ABS.
What is the legal status of this securitisation? Is it a true sale? Is
the SPV independent? How would you assess trhe credit condition of the
pool? When are investors repaid? What is the economics of the deal from
the point of view of Hyundai?
- Cash flow analysis
Risk, Ratings and Credit
From ABS to CDOs
- Pool analysis,
structure analysis, and determinants of credit risk
- Counterparties and
- Interest rate and
- The technique of
- Rating agency
analysis: stress testing approach
- What ratings mean in
the ABS world
- Getting a rating:
sequence and requirements
- Data requirements and
the review process
- Case study: Citi Credit Card
Securitization. How would you assess the credit risk in this
deal? What are the other risks? What protections do investors have?
- The credit crunch:
what were the fundamental mistakes made in the rating agency process?
- Has the process
changed? If so, how?
- Assignment: Moodys Ratings Revisions.
Please identify where Moody's is implementing changes to ratings
ABS vs Collateralized
- Cash flow versus market value CDOs
- CDO credit enhancement and ratings
- Tiering the
liabilities of a CDO
- CDO pricing and cash flow
- Case study: Northwesterly. What
assets in this CDO deal, and how are they funded?
- Rating CDOs: factors considered by
the rating agencies
- Using ratings loss tables to
structure credit enhancement in ABS
Exercise: Designing a CDO. Using information in the case study
and current market data, participants are set the task of designing an
arbitrage CDO. They help evaluate the pool,
legal structure and credit enhancement of a live securitization proposal
- Models rating agencies use
- Application: Risk analysis and rating of
- Credit enhancement with the Fitch Corporate Portfolio Model
European CDO Criteria
Credit Risk Transfer
derivatives work -- and how they are priced
forms of Credit Default Swaps and credit options
- Application: Jackfruit Records. A
credit default swap
- What are the ABX and
- Case study: Chase
Secured Loan Trust. Delegates learn how banks use
credit-linked notes to transfer credit risk
default swap in synthetic ABS
between synthetic ABS and the market for credit derivatives
Leveraged Risk Transfer and Super
for synthetic asset-backed securities
it works: more detail
- Case study: Latitude. Analysis of the
structure, settlement terms and risks of a synthetic CDO
regulatory issues relating to synthetics
and counterparty issues
- Team exercise: Transferring bank credit risk:
using the CDS market versus structuring
a synthetic CLO.
versus unfunded synthetic CDO tranches
and pricing of super-senior tranches
to the leveraged loan market
- Case study: Noname
Bank Synthetic CLO. Delegates work on the
a synthetic collateralized loan obligation with an unfunded
risk of funded versus unfunded risk transfer
- Group work: Orion
In this hands-on exercise, delegates assemble the elements of a
synthetic securitization with an unfunded super-senior tranche.
Bank Synthetic CLO
Orion Synthetic CDO
Derivatives 101 and
Asset-Backed Commercial Paper
Securitization: Residential and Commercial
is ABCP? Why has the market
- Single-seller vs
- ABCP arbitrage
- Applications of the
flexible conduit structure, and SIVs
asset-backed commercial paper
- Case study: Blue Titanium. List the
parties involved in this securitization. What are the roles of each?
How are investors protected?
- Liquidity -- what is
it, and where did it go?
- Measuring the
liquidity risk premium
- Exercise: What is Hannover's credit
Commercial MBS: Special
Pool paydown analysis
risk in residential MBS
pool ABS and the soft bullet repayment structure
RMBS trusts: how they work
risk and related issues
for residential mortgages: Thekwini
- Covered bonds
sale versus synthetic residential MBS
study: Memphis RMBS. This Dutch mortgage
securitization offers delegates an opportunity to
discover some of the key advantages and weaknesses of synthetic MBS
Future-Flow and Other Special
MBS: retail, office, multifamily, hotels, etc
of credit enhancement
of LTV in CMBS
and reserve accounts; liquidity facilities
and managing the balloon payment risk in CMBS
and super-senior CMBS
sale versus synthetic: the choice
- Special features of CMBS securitization
- Case study: Bear 2007
CMBS. What are the assets in this CMBS deal, and how is pool
analysis done? How do you think the credit enhancement was determined?
- Evaluating the current market and valuation issues in CMBS
New Risks, New Opportunities
- Whole business
- Overview of monoline
insurance model and ratings leverage
- When things went
wrong: counterparty risk and erosion of capital
- Case study: Arsenal. List the
parties involved in this kind of securitization. What are the roles of
each? How are investors protected?
- Special Session:
Subprime Loans and the Credit Market Crisis.
the causes and implications of the securitization losses?
study: Magnolia Finance. As a potential investor, evaluate this
opportunities, new risks in securitization
Bear Stearns CMBS 2007
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
of International Fixed Income Research at Drexel Burnham Lambert from
to 1989. The author of more than fifty articles on international
Dr Giddy has served at the International Monetary Fund and the U.S.
and has been a consultant with numerous financial institutions and
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
Money Market, The Handbook of International Finance, Cases
in International Finance, Global Financial Markets, Asset
Securitization in Asia, and The
Hudson River Watertrail Guide. He and his
wife are the founders of Wildcliff, a nature reserve in the Western