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Structured Products and Related Credit Derivatives: A Comprehensive Guide for Investors

Book Description

Filled with the insights of numerous experienced contributors, Structured Products and Related Credit Derivatives takes a detailed look at the various aspects of structured assets and credit derivatives. Written over a period spanning the greatest bull market in structured products history to arguably its most challenging period, this reliable resource will help you identify the opportunities and mitigate the risks in this complex financial market.

Table of Contents

  1. Cover Page
  2. The Frank J. Fabozzi Series
  3. Title Page
  4. Copyright
  5. Contents
  6. Foreword
  7. Acknowledgments
  8. About the Editors
  9. Contributing Authors
  10. SECTION ONE: Background
    1. CHAPTER 1: Introduction
    2. CHAPTER 2: Structured Finance Operating Companies: SIVs, SLVs, and Other Structured Vehicles
      1. STRUCTURED FINANCE OPERATING COMPANY DEFINED
      2. TYPES OF STUCTURED FINANCE OPERATING COMPANIES
      3. STRUCTURED INVESTMENT VEHICLES
      4. SLVs AND HYBRID SLVs
      5. THE RISK HISTORY OF SFOCs TO 2006
      6. THE 2007 LIQUIDITY CRISIS
      7. CONCLUSION
  11. SECTION TWO: Consumer ABS
    1. CHAPTER 3: Residential Asset-Backed Securities
      1. OVERVIEW OF THE MARKET
      2. COLLATERAL PERFORMANCE
      3. VOLUNTARY REPAYMENT
      4. ADJUSTABLE RATE REPAYMENT ANALYSIS
      5. INTEREST-ONLY REPAYMENT ANALYSIS
      6. FIXED RATE REPAYMENT ANALYSIS
      7. OTHER FACTORS INFLUENCING VOLUNTARY REPAYMENT
      8. COLLATERAL CREDIT PERFORMANCE
      9. INVOLUNTARY REPAYMENT (DEFAULT)
      10. OTHER FACTORS INFLUENCING INVOLUNTARY REPAYMENT RATES
      11. STRUCTURAL CONSIDERATIONS
      12. ASSET-BACKED CREDIT DEFAULT SWAPS
      13. ABX.HE INDEX
      14. SUMMARY
    2. CHAPTER 4: Credit Card ABS
      1. CREDIT CARD SECURITIZATION BACKGROUND
      2. CREDIT CARD ABS STRUCTURES
      3. SUMMARY
    3. CHAPTER 5: Auto Asset-Backed Securities
      1. ISSUANCE
      2. STRUCTURE
      3. ISSUER COLLATERAL PROFILE
      4. COLLATERAL PERFORMANCE
      5. DELINQUENCY AND LOSS RATES
      6. VALUATION
      7. AUTO LEASES
      8. SUMMARY
    4. CHAPTER 6: Student Loan ABS
      1. BACKGROUND
      2. TYPES OF LOANS
      3. LOAN STATUS
      4. INTEREST RATES
      5. PREPAYMENTS
      6. ISSUANCE
      7. TYPICAL BOND STRUCTURES
      8. RISKS
      9. CHARACTERISTICS OF STUDENT LOAN ABS
      10. SUMMARY
    5. CHAPTER 7: Small Business Loan ABS
      1. SMALL BUSINESS ADMINISTRATION
      2. SBA 7(a) LOAN GUARANTEE PROGRAM
      3. SBA 7(a) LOAN CHARACTERISTICS
      4. SECURITIZATION OF UNGUARANTEED PORTIONS OF SBA 7(a) LOANS
      5. SECURITIZATION OF CONVENTIONAL SMALL BUSINESS LOANS
      6. SMALL BUSINESS LOAN LOSS PERFORMANCE ON SBA 7(a) LOANS—BANCLAB LLC DATA
      7. SUMMARY
    6. CHAPTER 8: Valuation of Subprime ABS Credit Default Swaps
      1. CREDIT DEFAULT SWAPS
      2. PAY-AS-YOU-GO CDS STRUCTURE FOR SUBPRIME ABS
      3. INTEREST SHORTFALL CONSIDERATIONS
      4. STEPPING UP
      5. PHYSICAL SETTLEMENT
      6. HEDGING WITH CREDIT DEFAULT SWAPS
      7. ZERO MONEY DOWN!
      8. CDS PRICES VERSUS CASH BOND PRICES
      9. PRICING WHEN THE CDS SPREAD EQUALS THE REFERENCE COUPON SPREAD
      10. HEDGING WITH NO MONEY DOWN
      11. THE VALUE OF SCENARIO ANALYSIS
      12. HOW ARE MORTGAGE POOL SCENARIOS CREATED?
      13. SUMMARY
  12. SECTION THREE: Collateralized Debt Obligations
    1. CHAPTER 9: Basics of CDOs
      1. A BRIEF HISTORY OF CDOs
      2. CDO BASICS
      3. PARTICIPANTS IN A CDO TRANSACTION
      4. CDO PURPOSES
      5. CDO STRUCTURES
      6. CDO LIFE CYCLE
      7. EMBEDDED CALLS
      8. COVERAGE TESTS
      9. SPECIAL TRIGGERS: PAR PRESERVATION AND TURBO FEATURES
      10. CASH FLOW CDO WATERFALL
      11. QUALITY TESTS
      12. SPECIAL RIGHTS FOR THE CONTROLLING CLASS
      13. CDO CASH SOURCES AND USES
      14. CDO TRUTHS, HALF-TRUTHS, AND MYTHS
    2. CHAPTER 10: CDOs by Asset Type
      1. CONSTRUCTING THE CDO PORTFOLIO
      2. COLLATERALIZED LOAN OBLIGATIONS AND SPECULATIVE-GRADE CORPORATE COLLATERAL
      3. LEVERAGED LOANS AS COLLATERAL
      4. ABS CDOs
      5. MIDDLE-MARKET CLOs
      6. TruPS
      7. EUROPEAN CDOs
      8. SUMMARY
    3. CHAPTER 11: Credit Derivatives and Synthetic CDOs
      1. SINGLE-NAME CREDIT DEFAULT SWAPS
      2. CDS INDEXES
      3. INDEX TRANCHES, SWAPS, SYNTHETIC EQUITY, AND CDOs
      4. SYNTHETIC CDOs
      5. CORRELATION
      6. SUMMARY
      7. APPENDIX A: INDEX ELIGIBILITY RULES
      8. APPENDIX B: THE MECHANICS OF CASH SETTLEMENT
    4. CHAPTER 12: CDO Performance
      1. UPGRADE/DOWNGRADE STATISTICS SUFFER FROM A VINTAGE BIAS
      2. RETURN PERFORMANCE DATA MAY NOT BE INFORMATIVE
      3. WHAT DOES THE MARKET TELL US ABOUT MANAGERS?
      4. SOME CASE STUDIES
      5. WHAT DO THE RATING AGENCIES HAVE TO SAY ABOUT MANAGERS?
      6. SHOULD EQUITY INVESTORS LOOK FOR MANAGERS WITH EQUITY STAKES?
      7. IS GOOD PERFORMANCE THE RESULT OF LUCK OR SKILL?
      8. MARKET EFFICIENCY AND MANAGER PERFORMANCE
      9. NO CDO BENCHMARKS
      10. CDO RATINGS TRANSITIONS
      11. LIQUIDITY CONSIDERATIONS
      12. SO WHAT SHOULD INVESTORS DO?
      13. CONCLUSION
      14. APPENDIX: RATING AGENCY REPORTS
    5. CHAPTER 13: CDO Equity
      1. WHAT IS CDO EQUITY?
      2. WHAT ARE THE ADVANTAGES OF CDO EQUITY?
      3. WHAT ARE THE RISKS OF CDO EQUITY?
      4. HOW CAN INVESTORS GAIN EXPOSURE TO CDO EQUITY?
      5. WHAT ARE THE SOURCES OF EQUITY CASH FLOWS?
      6. WHAT IS THE BEST TIME TO INVEST IN CDO EQUITY?
      7. WHAT IS THE TYPICAL LIFE CYCLE FOR EQUITY?
      8. HOW CAN WE MEASURE PERFORMANCE?
      9. ISSUE PERFORMANCE
      10. WHAT INSIGHTS DO OTHER DATA SOURCES SAY ABOUT EQUITY PERFORMANCE?
      11. CDO EQUITY PERFORMANCE DRIVERS
      12. HOW SHOULD INVESTORS ANALYZE EQUITY RETURNS?
      13. CONCLUSION
      14. APPENDIX: WHAT IS THE COST OF EARLY REDEMPTION?
  13. SECTION FOUR: Commercial Real Estate
    1. CHAPTER 14: Commercial Mortgage-Backed Securities
      1. WHAT ARE COMMERCIAL MORTGAGE-BACKED SECURITIES?
      2. THE CHARACTERISTICS OF COMMERCIAL REAL ESTATE LOANS
      3. ANALYZING AND VALUING CMBS
      4. HOW CMBS TRADE
      5. CMBS PERFORMANCE
      6. WHO SHOULD AND DOES INVEST IN CMBS?
      7. CONCLUSION
    2. CHAPTER 15: Understanding Managed CRE CDOs
      1. EVOLUTION OF THE MARKET FOR B-NOTES, MEZZANINE LOANS, PREFERRED EQUITY, AND RAKE BONDS
      2. EVOLUTION OF COMMERCIAL REAL ESTATE CDOs
      3. ANATOMY OF THE NEW MANAGED CRE CDO STRUCTURES
      4. UNDERSTANDING THE COLLATERAL: MEZZANINE DEBT, B-NOTES, RAKE BONDS, AND PREFERRED EQUITY
      5. CONCLUSION
      6. APPENDIX A: DEFINITION OF ACCEPTED SERVICING PRACTICES
      7. APPENDIX B: B-NOTES: JUNIOR PARTICIPANTS' RIGHTS
    3. CHAPTER 16: Synthetic CRE CDOs
      1. GROWTH AND EVOLUTION OF THE SYNTHETIC CRE CDO MARKET
      2. SYNTHETIC CDOs FROM THE GROUND UP
      3. CREDIT EVENTS: PRINCIPAL WRITEDOWN AND INTEREST SHORTFALL
      4. ISSUER AND INVESTOR CONSIDERATIONS WITH SYNTHETIC COLLATERAL
      5. SYNTHETIC BALANCE SHEET DEALS
      6. INVESTOR'S GUIDE TO SYNTHETIC CDOs
      7. CONCLUSION
    4. CHAPTER 17: European Commercial Real Estate CDOs
      1. CRE CDO COLLATERAL
      2. CRE CDO STRUCTURE
      3. INVESTING IN CRE CDOs
      4. APPENDIX: CMBS VERSUS CRE CDOs
    5. CHAPTER 18: Government National Mortgage Association Multifamily Deals
      1. THE PATH TO A GNMA MULTIFAMILY DEAL
      2. A CLOSER LOOK AT GNMA MULTIFAMILY DEALS
      3. FHA PROGRAM TYPES
      4. HOW ARE THE DEALS STRUCTURED?
      5. TRADING GNMA MULTIFAMILY BONDS
      6. PREPAYMENT ANALYSIS OF GNMA MULTIFAMILY LOANS
      7. HISTORICAL PREPAYMENTS
      8. DEFAULT ANALYSIS OF GNMA MULTIFAMILY LOANS
      9. CONCLUSION
      10. APPENDIX A: FHA-APPROVED LENDERS IN 2006
      11. APPENDIX B: GNMA REMIC MULTIFAMILY DEAL LIST, 2001–2006: Q3
      12. APPENDIX C: CALL PROTECTION BREAKDOWN IN GNMA MULTIFAMILY DEALS BY YEAR
      13. APPENDIX D: HISTORICAL GNMA DEFAULTS, 1994–2006: Q3
  14. SECTION FIVE: Commercial ABS
    1. CHAPTER 19: Aircraft-Backed Debt Securities
      1. HISTORICAL BACKGROUND TO THE AIRCRAFT-BACKED DEBT MARKET
      2. THE MARKET FOR AIRCRAFT-BACKED SECURITIES
      3. EETCs AND POOLED LEASE ABS COMPARED
      4. AIRCRAFT ABS DEAL STRUCTURES
      5. MODELING AIRCRAFT CASH FLOW
      6. DATA QUALITY AND MODEL RISKS
      7. WORLDWIDE MARKET FOR COMMERCIAL AIRCRAFT
      8. SUMMARY
    2. CHAPTER 20: Intermodal Equipment Securitization
      1. MARKET BACKGROUND
      2. DEAL STRUCTURE
      3. ISSUER OVERVIEW
      4. OUTLOOK FOR ISSUANCE
      5. CONCLUSION
    3. CHAPTER 21: Life Insurance Reserve Securitization
      1. THE LIFE INSURANCE SECURITIZATION MARKET
      2. RESERVE FUNDING SECURITIZATION
      3. THE LEVEL PREMIUM GUARANTEED POLICY
      4. TRANSACTION STRUCTURES
      5. CONCLUSION
  15. Index