- resources in finance

Amsterdam Institute of Finance

NIBC Capital
Structured Credit and Real Estate Finance
for Analysts

Prof. Ian Giddy, New York University

About the Course
This 3-day module provides banking and finance professionals with an improved understanding of new developments in securitization and structured credit risk transfer. Based on the fundamental techniques of asset securitization, the market now allows players a much wider range of choices in managing credit risk exposure. In addition to covering risk transfer through asset-backed securities and collateralized debt obligations, the course explains risk transfer using synthetic asset securitization, a versatile and fast-growing technique in the ABS market. It also covers whole business securitization and related topics, and the growing market for commercial as well as residential mortgage-backed securities.



Day 1 Asset-Backed Securities Today
  • The state of the ABS market: growth, performance, prime and sub-prime
  • Getting a deal to market: the process
  • Case study: Finance Company Limited. Delegates review the process, structure and cash flows of this deal
  • Key legal prerequisites of ABS today
  • True sale issues, tax status, regulatory capital
  • Example: Ford Motor Credit Auto Loan securitization
  • Legal and economic separability of the sponsor from the issuer
  • Whole business securitization
  • Case study: Consumer Finance ABS. What is the legal status of this securitization? Is it a true sale? Is the SPV independent?
  • Credit enhancement techniques
  • Tiering the funding structure
  • Cash flow analysis and pricing
  • Rating implications of pro-rata versus sequential-pay deals
Asset-Backed Commercial Paper
  • Single-name versus multi-name ABCP
  • ABCP conduits
  • Applications of the flexible conduit structure
  • Case study: Thekwini. How did the sponsor of this residential mortgage conduit deal with the funding mismatch?
From ABS to CDOs
  • Classic ABS vs Collateralized Debt Obligations
  • Cash flow versus market value CDOs
  • CDO credit enhancement and ratings
  • Team assignment: Analysis of European CDO ratings criteria
  • Tiering the liabilities of a CDO
  • CDO pricing and cash flow analysis
  • Case study: Atrium. What are the 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, delegates are set the task of designing an arbitrage CDO.

Case studies
Finance Co. Ltd
6 Battery Road
Designing a CDO

Collateralized Loan Obligations
Fitch European CDO Criteria

ABS Economics
CLO Economics

Day 2

Structured Credit Risk Transfer
  • Team Assignment: Using a Monte Carlo model to simulate default probabilities and stressed loss rates
  • How credit derivatives work -- and how they are priced
  • Alternative forms of CDS and credit options
  • Application: A CDS Term Sheet. In which events of default and settlement terms are specified.
  • 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
  • Links between synthetic ABS and the market for credit derivatives
  • 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
Synthetic Securitization
  • Rationale for synthetic asset-backed securities
  • How it works: more detail
  • Case study: Magnolia Finance. Analysis of the structure, settlement terms and risks of a synthetic Residential Mortgage CDO
  • Credit and regulatory issues relating to synthetics
  • Settlement and counterparty issues
  • Team exercise: Allied Irish Bank. Transferring bank credit risk: using the CDS market versus structuring a synthetic CLO.
Leveraged 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
  • Group work: Orion Synthetic CDO.  In this hands-on exercise, delegates assemble the elements of a Calyon-sponsored synthetic securitization with an unfunded super-senior tranche.


Case studies
CDS Sample Termsheet
Global High Yield Bond Trust
Magnolia Finance
Allied Irish Bank
Noname Bank Synthetic CLO
Orion Synthetic CDO

Credit Derivatives 101 and 102
Synthetic Asset-Backed Securities

CDO Monte Carlo

Day 3

Developments in Real Estate Finance
  • Residential MBS: a variety of techniques
  • Dealing with prepayment: pass-through versus cash flow reallocation
  • UK master RMBS trusts: how they work
  • Comingling risk and related issues
  • Case study: Mound Financing. Is this a "socialist" or a "capitalist" deal?
  • Covered bonds
  • True sale versus synthetic residential MBS
  • Case study: Memphis RMBS. This Dutch mortgage securitization offers delegates an opportunity to discover some of the key advantages and weaknesses of synthetic MBS
Commercial MBS
  • Commercial MBS: retail, office, multifamily, hotels, etc
  • Legal structures
  • Valuation, loan-to-value ratios, and coverage ratios
  • Stress testing and credit enhancement
  • Senior-subordination credit support; spread and reserve accounts; liquidity facilities
  • Multi-tier and super-senior CMBS
  • Case study: Bear Stearns CMBS. Delegates study this US deal to investigate the funding structure and credit risk issues involved in the securitization of commercial property.
  • Understanding and managing the balloon payment risk in CMBS
  • Single-property CMBS securitization
  • Case study: Hung Tai REAT. What is the ultimate LTV for the senior investors? Where will the money come from to repay the principal at maturity?
  • CMBS conduits
  • Alternative techniques of synthetic commercial mortgage-backed securities
  • Case study: Castenea Synthetic CMBS. Delegates learn how to apply the synthetic technique to commercial property financing
Summary and Conclusions
  • New opportunities, new risks in property finance and securitization


Case studies
Ontario Home
Mound Financing

Memphis RMBS
Bear Stearns CMBS
Hung Tai REAT

RMBS Master Trusts
Evaluating CMBS
Synthetic CMBS
Credit Checklist

RMBS Paydown Analysis

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. He and his wife are the founders of Cloudbridge, a nature reserve in Costa Rica. | | | | contact
Copyright ©2007 Ian Giddy. All rights reserved.