You are previewing The Securitization Markets Handbook: Structures and Dynamics of Mortgage-and Asset-Backed Securities.
O'Reilly logo
The Securitization Markets Handbook: Structures and Dynamics of Mortgage-and Asset-Backed Securities

Book Description

In this long-awaited handbook, noted experts Charles Stone and Anne Zissu provide an enlightening overview of how securitization works and explain how future cash flows from various asset classes—from credit card receipts to mortgage payments—can be packaged into bond-like products and sold to investors.

Once a marginal source of funds, securitization is now an essential corporate funding technique widely adopted by financial and industrial companies throughout the world to finance both working capital and capital budgets. It is also used as a risk-management tool and a source of liquidity. Securitization has been adapted to fund corporate acquisitions, to capitalize future streams of revenue, and to liquidate pools of nonperforming loans.

With examples from companies such as GE Capital, Ford Motor Credit, Countrywide Home Loans, and D&K Healthcare, The Securitization Markets Handbook provides descriptions of all major classes of asset-backed securities and offers a practice-oriented commentary on trends in securitization and the value of asset- and mortgage-backed securities across industries and throughout the global markets.

The authors approach the topic from both sides of the market: the supply side, where assets are securitized and mortgage- and asset-backed securities are issued, and the demand side, where investors choose which classes of mortgage and asset-backed securities will enhance their portfolios or serve as efficient hedges. The book's detailed explanations and practical examples make it a valuable guide both for experienced money managers trying to put a securitization strategy into place and for those new to securitization looking to acquire a broad and strong foundation in the subject.

Table of Contents

  1. About the Authors
  2. Title Page
  3. Copyright Page
  4. Dedication
  5. Table of Exhibits
  6. Acknowledgements
  7. Introduction
  8. PART ONE - Key Structures and Cash Flow Dynamics
    1. Chapter One - Mortgage-Backed Securities
      1. Origins of the Market
      2. From the Primary to the Secondary Mortgage Market
      3. Agency and Nonagency Market Segments Compared
      4. Pricing of Newly Originated Mortgages
      5. Chapter Notes
    2. Chapter Two - Price Dynamics of Mortages and Cash Flows
      1. Bond and Mortgage Basics
    3. Chapter Three - Valuation of Mortgage- and Asset-Backed Securities
      1. Modeling Cash Flows of Pass-Through, PO, and IO Securities
      2. Effective Duration
      3. Effective Convexity
      4. Case Study: A Pass-Through Security Issued by FNMA
      5. Case Study: Principal-Only and Interest-Only Securities
      6. Chapter Notes
    4. Chapter Four - Other Structures in Asset-Backed Securities: CMOs, PACs, Floaters, and Inverse Floaters
      1. Collateralized Mortgage Obligations
      2. Planned Amortization Class
      3. Floaters and Inverse Floaters
  9. PART TWO - Corporate Debt and the Securitization Markets
    1. Chapter Five - How Ford Motor Credit Corporation Has Used Securitization
      1. The Case of Ford Motor Credit
      2. Securitized Receivables
      3. Advantages of Securitization
      4. Special-Purpose Structure
      5. Allocating and Funding Credit Risk: Subordinate Classes and Residual Interests
      6. The Two-Step Securitization Transaction
      7. Credit Ratings and On-Balance-Sheet versus Off-Balance-Sheet Cost of Funding
      8. Ford Credit Auto Owner Trust 2000-A: A Case Study
      9. Waterfall of Cash Flows
      10. Credit Enhancement
      11. Overcollateralization
    2. Chapter Six - Asset-Backed Commercial Paper
      1. Why Companies Use Asset-Backed Commercial Paper Programs
      2. ABCP Characteristics
      3. Credit Enhancement and Liquidity Support
      4. Accounting Treatment
      5. Risk-Based Capital Regulations
      6. Conversion Factor for Liquidity Facilities
      7. Restructuring Possibilities
  10. PART THREE - Securitization of Revolving Credit
    1. Chapter Seven - Dealer Floor Plan Loans
      1. Trends in Wholesale Automobile Credit Securitization
      2. Basics of the Securitization Scheme
      3. Securing Liquidity
      4. Shifts in Seller’s Interest and Investor Interest
      5. Seller’s Claim on Receivable Pool
      6. Factors in Credit Line Variability
      7. Pool Size Matters
    2. Chapter Eight - Credit Card Receivables
      1. Elements of a Master Trust Pooling and Servicing Agreement
      2. Basics of the Securitization Scheme
      3. The Seller’s Interest and Investor Interest
      4. Retained Interest
      5. Credit Risk and Credit Enhancement
      6. Tranches for A, B, and C Classes
      7. ERISA Restrictions
  11. PART FOUR - Searching for Value in the Mortgage- and Asset-Backed Markets
    1. Chapter Nine - Investment, Speculation, and Hedging
      1. Target Investment
      2. Subordinate Segment of Private-Label MBSs
      3. Interest-Rate Risk
      4. Interest-Only Strips as a Hedging Tool
      5. Principal-Only Strips as a Hedging Tool
      6. Inverse Floaters as a Hedging Tool
      7. Hedging CMOs with Options on Treasury Bonds
    2. Chapter Ten - Credit Risk
      1. Direct Financing of Risk versus Buying a Financial Guaranty
      2. A Financial Guaranty Is Not an Insurance Contract
      3. Selecting Efficient Forms and Levels of Credit Enhancement
      4. Relative Value in Credit-Enhancement Structures
  12. Index
  13. About Bloomberg