Duration: 2 days
- Introduction to Asset Securitization
- Securitization Structuring
- Securitization of Commercial Assets
- Asset-Backed Commercial Papers
- Future Flow Securitizations
- Risk Securitization
- Securitization of Mortgage Lending
- Collaterized Debt Obligations
The objective of this seminar is to give you a good understanding of how “asset
securitization” is used by companies and financial institutions for liquidity creation, risk
transfer, regulatory arbitrage, risk management and yield enhancement.
We start with a general introduction to “securitization”. We present a generic securitization
transaction and discuss the benefits, risks and rewards of this financing technique. We also
briefly look at the historic development and recent market trends.
Further, we take a closer look at the various elements in the structuring of a securitization
transaction. We explain the role of the “Special Purpose Vehicle” (SPV) and discuss the legal
aspects in setting up such an SPV. Further we explain techniques for credit enhancement including
subordination, cash collateral, overcollaterization, yield spread accounts, credit substitution,
etc. We also explain the pass-through and pay-through techniques for payment management and special
features like soft bullets, clean-up calls, and replenishment.
We then present and explain a number of specific structures: Securities backed by home equity loans
and “subprime” mortgages, commercial receivables, auto loans, credit card loans. We also present
examples of “future flow” and of “intellectual property” securitizations. In each case, we explain
the main deal features, and we illustrate with real-life case studies.
Further, we explain the mechanics, pricing and risks of mortgage backed securities and their
derivatives (CMO’s, REMICs, IO/PO strips and other structures).
Finally, we look at “Collaterized Debt Obligations” - the securitization of bank loans, bonds and
other financial assets. We explain how these structures are used to transfer risk, to obtain
funding of illiquid asset portfolios, to obtain regulatory relief and to enhance the return on
capital of banks with high funding levels. We give practical, real-life examples of these
structures, and we explain their pricing and risk characteristics.
Day One
09.00 - 09.15 Welcome and Introduction
09.15 - 12.00 Introduction to Asset Securitization
- What is “Securitization”?
- Brief history of market developments
- Motives for Securitization
- Overview of Securitization Structures
Securitization Structuring
- Setting Up the SPV
- Credit Enhancement Techniques
- Rating of Structured Securities
-
Payment Management
- Pass-through vs. pay-through
- Prepayments
- Early amortization triggers
- The Role of the Trustee
- The Role of the Servicing Agent
12.00 - 13.00 Lunch
13.00 - 16.30 Securitization of Receivables and Commercial Assets
- Automobile Loans
- Credit Card Receivables
- Home Equity Loans
- Equipment Leases
- Securitization of Intellectual Property
- Future Flow Securitizations
- Asset-Backed Commercial Papers
- Case Studies
Risk Securitization
- Introduction to Risk Securitization
-
Case Studies
- Contingent surplus notes
- “Act of God” bonds
- Exchange traded catastrophe options
- Securitization of mortality risk
Day Two
09.00 - 09.15 Recap
09.15 - 12.00 Securitization of Mortgage Lending
-
Introduction to Mortgages and MBS
- Prime, Subprime and “Alt-A”
- Mortgage Lenders and “Agencies”
-
Mortgage Derivatives
- REMICs, PAC’s, TAC’s and CMO’s
- IO/PO strips
- Inverse floaters
-
Risks of MBS and CMO’s
- Prepayment risk
- Contraction and extension risk
-
Prepayment Analysis
- Factors that affect prepayments
- Prepayment models
- Option adjusted analysis (OAS)
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Collaterized Debt Obligations
- Concepts of CDO Transactions
-
CDO Structures
- Collaterized Loan Obligations
- Collaterized Bond Obligations
- Arbitrage/balance sheet CDO’s
- Distressed debt CDO’s
- ABS and real estate CDO’s
-
Applications of CDO’s
- Regulatory arbitrage
- Yield enhancement
- Bond market arbitrage
- Managing capital ratio
- Improving bank RAROC
- Case Studies and Exercises
Evaluation and Termination of the Seminar