Asset-backed securities

Understanding the mechanism and the rationale for securitisation

Course objectives

  • Understand securitisation mechanics

  • Gain insight into the various types of ABS from the investor's point of view

  • Be able to assess the strengths and weaknesses of a transaction

Securitisation mechanism

  • The general process of securitisation
  • Transaction main parties and their role
  • Key legal concepts
    • Transfer (true sale, synthetic, ring-fencing, etc..)
    • Legal environment
  • Tranching and credit enhancement
  • Internal vs external ('monolines') credit enhancement
  • Static vs dynamic credit enhancement
  • Cash flow structures
    • Revolving
    • Bullet
    • Controlled amortisation
    • Pass-through
  • Credit rating agencies: overview of the rating process

Main asset classes

  • Asset-Backed Securities (ABS)
  • Mortgage-Backed Securities (MBS)
  • Residential Mortgage-Backed Securities (RMBS)
  • Commercial Mortgage-Backed Securities (CMBS)
  • Collaterised Loan Obligations (CLO)
  • Collaterised Debt Obligations (CDO)
  • Insurance risk securitisation
  • Synthetic securitisation
  • Asset-Backed Commercial Paper (ABCP)
  • Master trusts

The future of Securitisation

  • Pros and Cons for issuers and investors
  • Main specific risks of ABS
  • Role played by securitisation in the financial crisis
  • Main reforms in the wake of the financial crisis

Case Studies: Life cycle of several actual ABS transactions

- Investor presentation

- Transaction term-sheet

- Rating agencies' pre-sale reports

- Bond prospectus

- Investors reports

Emmanuel Schatz

Emmanuel Schatz

Emmanuel has worked for over 20 years on the financial market. He has worked as a trader on interest and exchange rates. Since 10 years he is manager of rates at Natixis AM. Emmanuel shares his mastery of a wide range of products and markets in which he has intervened both as a trader and a manager.

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