Asset Securitization - ABS, CDOs and CBOs

• 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