Understanding Securitization and ABS
Key Learning Outcomes:
- Use a structured approach to understand ABS (using credit card ABS as the illustration asset class): basic transaction structures, roles of the parties, and originator motivations
- Recognize the main risks pertaining to the collateral, originator and servicer
- Appreciate how asset characteristics and desired ratings impact credit enhancement levels
- Identify key risks and understand how they are allocated within ABS structures
- Understand the impact of recent government initiatives and regulatory changes on the ABS market.
- Why securitization? Originator and investor motivations
- Parties to the transaction and their roles
- Overview of securitization market.
Analytic approach to credit
- Introducing a structured approach to analysis: purpose, payback, risk and structure
- Application of the structured approach to various types of ABS securities.
Risks to Repayment
- Analytic focus: credit card ABS
- Key performance variables: applying steady state assumptions and credit stresses
- Understanding how credit enhancement is sized
- Modelling the impact of various stress scenarios across different credit card portfolios
Originator / servicer evaluation
- Company analysis: commercial and financial viability
- Risks arising from the business model
- Servicer ratings: why, how and impact on credit enhancement
Credit Enhancement (CE)
- Understanding the role and various forms of CE
- Unravelling CE across asset classes (credit card, auto, and mortgage transactions)
- Clarifying loss allocation
- Safeguards: ensuring credit enhancement mechanisms provide adequate protection
- Cash-flow waterfalls: Amortizing and non-amortizing assets
- Cash flow allocation mechanics
- Early amortization triggers: how they are set and how they operate
- Key legal safeguards: isolation of assets
- Reps and warranties.
- Surveillance: collateral, originator / servicer
- Interpreting performance to identify early warning signals
- Overview of performance across asset classes.
- Pricing of ABS transactions: risk vs. return
- Credit trends in ABS: pockets of risk.
Who should attend
An introductory workshop for those new to the securitization market or seeking an understanding of the ABS product.