Securitization and Asset-backed Securities
Financial services professionals, consultants, and sales professionals interested in providing or selling products and services to banks, investment companies, and other financial corporations, and everyone interested in creation and use of credit derivative instruments
Please contact us for information about prerequisites.
Securitization has become one of the leading tools used by banks and other financial institutions to manage their balance sheet by transferring assets off the balance sheet typically loans. The securitization process and the products involved are highly complex financial tools and transactions, which can limit investors’ ability to monitor and manage risk. Securitization became a widespread practice in the 1970s, although examples of it can be found much earlier. It has experienced immense growth globally, by some estimates to around $13 trillion. Securitizations involving mortgages and other assets, such as credit card receivables, housing and auto loans, airline receivables, and student loans, have become common place. Securitization brings many advantages to the issuer in the form of lower funding costs, reduction in asset and liability mismatching, as well as lower capital requirements and transfer of credit risk.
This course introduces the concept of securitization and important aspects relating to it, such as the role of a special purpose vehicle and note tranching. It examines mortgage-backed securities (MBS) and the major risks faced by investors. Different asset-backed security (ABS) structures, which include securities backed by credit card receivables, home equity loans, auto loans, and student loans, are presented at a high level. Then, the course presents the structure of collateralized debt obligations (CDOs) that include collateralized bond obligations (CBOs) and collateralized loan obligations (CLO), as well as how regular CDOs and Synthetic CDOs are used for arbitrage and balance sheet transactions.