Securitization is sometimes referred to as structured finance or asset backed securities (ABS). It is the process of pooling similar types of assets together, such as residential mortgages or car loans, and then selling them to a special purpose vehicle (SPV). In turn, the SPV issues securities, such as notes, to raise cash to pay for the assets the SPV is purchasing. To illustrate this process, the course starts off by discussing a generic securitization structure and the motivations for issuers and investors. Presale reports will be used to help demonstrate the process. The different types of underlying collateral are explored along with the structure of the deal including credit enhancements, such as overcollateralization and reserve accounts. There are many terms related to securitization including origination, prepayments, and waterfall, to name only a few. These are introduced throughout the course. The differences between agency residential mortgage backed securities (RMBS) and non-agency mortgage backed securities (NARMBS) will be explained. The structure of the deal and the corresponding tranches/classes are evaluated with particular focus on what risk factors will impact their valuation.
By the end of the session, participants will be able to:
- Explain the features and characteristics of securitization
- Discuss the main terminology used in the marketplace
- Identify the main applications of securitization
- Recognize the main risks
- Identify the different structures in the market
Prerequisites: Suggested but not required
- Introduction to Capital/Financial Markets or equivalent knowledge
Program Level: Foundational
Target Audience: Anyone who wants to learn about securitization, such as staff from operations, IT, legal, compliance, middle office, and HR, and regulators who work closely with various aspects of the fixed income and securitization markets.
Advance Preparation: None
Computers and Financial Calculators: Computers or tablets for viewing and accessing the electronic documents
“Great overview of securitizations to both reinforce and enhance my current knowledge and understanding in this area.”
The class was a “great overview of securitizations to both reinforce and enhance my current knowledge and understanding in this area,” said a recent graduate while another called it a “great session.” Both gave the course their highest rating.
Recommended CPE Credits: 3
Duration: 2.5 Hours