Giddy: Synthetic Asset-Backed Securities Workshop - resources in finance

Euromoney Training

Synthetic Asset-Backed Securities

Prof Ian Giddy
Stern School of Business, New York University

What the Course is About

Asset-backed securities constitute a growing segment of the global capital markets and have become widely employed in developing as well as developed countries.

Risk transfer using synthetic asset securitization technique is the fastest growing segment of the ABS market. It opens new possibilities for the transfer, pricing and management of credit risk. This workshop explores the nature of synthetic asset-backed securities and its links to the markets for credit derivatives and leveraged finance.

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. 

Who Should Attend?
This workshop will prove informative to all involved in asset-backed securities and corporate finance. It includes material of relevance to commercial lenders and investment bankers, debt originators and investors in asset-backed securities. Also credit specialists; securities analysts; investment officers and fund managers; legal advisors; and other individuals whose professional future may be enhanced by an understanding of synthetic securitization techniques.

Issues to be Discussed

  • What distinguishes synthetic securitization from "true sale" securitization?
  • What are the key legal issues, and how are they addressed in the case of synthetic ABS?
  • What are bank regulators' concerns?
  • What drives ratings of synthetics?
  • What are the counterparty triggers in synthetics?
  • Originators in synthetics - the weak link or hidden strength?
  • How can one evaluate different synthetic collateralized debt obligations (CDOs)?
  • What is the role and pricing of the super-senior tranche of some synthetic ABS?
  • Why is the synthetic approach used in many residential and commercial mortgage-backed financings?
  • How can the synthetic ABS technique be applied to different classes of assets?

Synthetic Asset-Backed Securities
Workshop outline
Day 1
  • Introduction and course objectives
  • The market for structured credit
    • Classic ABS and Collateralized Debt Obligations
    • True sale versus synthetic securitization
    • Case study: Global High Yield Bond Trust. This European hybrid CDO allows delegates to see the key elements that distinguish synthetic from true sale language
    • Rationale for synthetic asset-backed securities
    • Tiering the liabilities of a CDO
    • CDO pricing and ratings
    • Cash flow analysis for investors in synthetics
    • Credit and regulatory issues relating to synthetics
    • Rating synthetic CDOs: factors considered by the rating agencies
  • The structure of synthetic asset-backed securities
    • Case study: Creating a Synthetic CLO.  In this hands-on exercise, delegates assemble the elements of a synthetic securitization of a bank loan portfolio
    • Credit-linked notes
    • Case study: Chase Secured Loan Trust. Delegates learn how banks use credit-linked notes to transfer credit risk
    • The credit default swap in synthetic ABS
    • Alternative forms of CDS and credit options
    • How credit derivatives work -- and how they are priced
    • Links between synthetic ABS and the market for credit derivatives
    • Case study: Allied Irish Bank. Transferring bank credit risk: using the CDS market versus structuring a synthetic CLO.

Day 2
  • Review of Day One
  • Unfunded risk transfer
    • Funded versus unfunded synthetic CDO tranches
    • Structure and pricing of super-senior tranches
    • Application to the leveraged loan market
    • Case study: Noname Bank Synthetic CLO.  Delegates work on the details of a synthetic collateralized loan obligation with an unfunded super-senior tranche.
    • Counterparty risk of funded versus unfunded risk transfer
  • Synthetic mortgage-backed securities
    • Case study: Memphis RMBS. This Dutch mortgage securitization offers delegates an opportunity to discover some of the key advantages and weaknesses of synthetic MBS
    • Synthetic commercial mortgage-backed securities
    • Case study: Castenea Synthetic CMBS. Delegates learn how to apply the synthetic technique to commercial property financing
  • Applications of synthetic securitization to other asset classes
    • Index trading of ABS risk
  • New opportunities, new risks in synthetics

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 Securitization in Asia, and The Hudson River Watertrail Guide. | | | | contact