Finance is the design of debt, equity and hybrid financing
techniques in order to resolve particular issuer or investor needs
cannot readily be met by conventional financing techniques. A major
of today's structured finance is the
use of asset securitization. ABS (asset-backed securities) and
MBS (mortgage-backed securities) constitute an important part of the
the tools of asset-liability management.
For more resources see
instructor's websites, giddy.org
Participants will be provided with a
useful to the structuring and analysis of specially tailored financing
pertinent articles, rating agency reports and sample documentation from
actual deals done in North America and elsewhere.
Giddy has taught finance at NYU, Columbia, Wharton, Chicago and
in 40 countries abroad for the past two decades. He was Director of
Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The
author of more than fifty articles on international finance, he has
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. As a banker and consultant he has been involved in the
growth of the ABS market in the USA, Europe and Asia. 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
River Watertrail Guide.
Structured Finance is the
or equity financing techniques in order to solve particular issuer or
problems that cannot be solved by conventional methods.
workshop will be taught
five major topics employing in-depth group work on case studies,
financial analysis and
documentation. The focus will be on asset-backed securities and the
management of fixed-income portfolios with a special emphasis on
one of the core techniques of structured finance,
constitutes a growing segment of the European
global capital markets. Asset-backed securities are securities
which are linked to identified pools of underlying assets. The key lies
segregation of the risk of the asset pool from the risk of the
many financial institutions are looking at using structured finance
as a broader tool,
including the use of collateralized debt obligations, which match pools of loans or bonds with high-grade funding. A
further development is "synthetic" asset-backed securitization, which
is part of the burgeoning market for credit risk transfer.
We offer an economic cost-benefit analysis of
these techniques, an insight into the legal, accounting, tax and
principles, and the balance sheet risks and how they can be managed
using debt and derivatives as tools of asset-liability management.
The workshop will
include case studies of actual financings,
well as hands-on
exercises, and will give participants the opportunity to demonstrate
understanding of deals through presentations and discussions.
Some of the issues to be explored:
- What is structured finance? Why and when should companies
consider the use of structured financing techniques?
- What are the key legal and credit issues surrounding
asset-backed financing, and how can they be satisfied?
- How have developments in the CDO market affected the credit
- Synthetic ABS: how do they really work, and what are their
and shortcomings? How are credit derivatives used in conjunction with
- What role does "duration analysis" play in a pension
funds immunization strategy?
- How can duration, convexity and immunization techniques be applied to a mortgage portfolio?
- What can these concepts tell us about how mortgage portfolios should be funded?
- How do equity-linked financing techniques such as
convertible bonds work, and when does it make sense to use them? How
are they priced?
- What are the techniques of asset-liability management, and how can they be applied at CMHC?
|| Structured Finance: Effective
Cost Analysis and Asset-Backed Securities
Credit Enhancement and the Rating
- Introduction to Structured Finance
- Survey of Structured Finance
Techniques, and When it
Makes Sense to Use Them
- Techniques of Effective Cost Analysis
study: A Day in the Life. Delegates compare
the techniques and effective cost of various structured bond issues.
- The ABS Market and the Securitization
- Case study:
Finance Company Ltd. Delegates study an example of a typical ABS
structure and cash flows
- Legal, Tax, Accounting and Disclosure
Aspects of ABS
- Case study:
Ford Motor Credit. Delegates dissect the pool quality, legal aspects and cash flow strucuture of a fixed-pool auto loan
- Cost-Benefit Evaluation
- Capital Cost Analysis for Financial
- 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
- Pool analysis; Seller/originator
risk; Swap counterparty risk; Legal risks; Sovereign risk. Originator,
servicer, counterparty and manager
- Techniques of Credit Enhancement:
Overcollateralization; Senior-subordinated structures; Excess servicing
and liquidity accounts; Financial guarantees
- Case study:
Atherton. Delegates use this deal to consider the rating process
and debate its merits
- Credit Analysis of Mortgage-Backed Securities
- Case study: Liberty NZ 2005-1. Delegates examine this residential MBS structure to find the drivers of credit enhancement and ratings transition.
Rating Residential Mortgage-Backed Securities
|| Collateralized Debt Obligations
- Credit: Understanding Default
Probabilities and Recovery Rates
- Ratings and Historical Loss Rates
- Using Ratings Loss Tables to
Structure Credit Enhancement in ABS
- CDOs: Collateralized Loan and
Collateralized Bond Obligations
- Cash-Flow and Market-Value CDOs
- Case study: CDO from Scratch. Using
information in the case study and current market data, delegates are
set the task of designing an arbitrage CDO.
- Synthetic Structures, Super-Senior
Tranches and the Role of Credit Derivatives
- Credit Derivatives and Credit-Linked Notes
study: Noname Bank Synthetic CLO. This deal
illustrates the role of credit
default swaps in synthetic asset-backed securities and credit-linked
Fixed-Income Portfolio Risk Management
- Risks Affecting Fixed-Income Portfolios
- Interest-Rate Risks:
- Volatility of Rates
- Yield Curve Risk
- Basis Risks
- Embedded Option Risks
- Measuring Rate Risk: Concepts and Measurement of Duration and Convexity
- Exercise: The GE Capital Bond
- Duration of Strips, Bonds, Bills, Floating-rate Notes and Swaps
- McCauley and McPension
study: Gold's Gym. Delegates apply a barbell strategy to a fixed-income liability structure.
- Option-pricing in bonds
- Exercise: A Bond for CMHC
- Duration and convexity in the context of mortgage-backed securities
studies: FannieMae MBS and REMIC. These deals are used to illustrate the power of duration analysis, and to consider convexity in fixed-income portfolios.
Duration and Convexity
Notes on Fixed Income Portfolio Management
Spreadsheets and Calculators
bond math and more
|| Structured Finance and Asset-Liability Management
Tools of Asset-Liability Management
- Option-Linked Securities
- When Should a Company Issue Hybrid
- Callable Bonds, Options, Swaptions
Fixed-Income Derivatives Embedded in Structured Financing Techniques
study: Guernsey. Demonstration of hands-on use of option-bond
pricing models and application by delegates
Bank Bond. Insight into Design and Pricing of Fixed-Income
- Applications to Mortgage Markets
- Measuring the Gap: Portfolio Duration and Value at Risk
- Closing the Gap: Portfolio Restructuring
- Closing the Gap: Derivatives
- Futures, Forwards and Swaps
- Delta, Gamma and the Use of Options
- Dynamic Hedging
- Exercise: Home to Canadians. Managing the interest-rate risk of a mortgage portfolio funded with a CMHC bond.
Spreadsheets and Calculators