Securitisation Swaps - A Practitioner''s Handbook

Develop the skillset essential to successful securitisation swaps management
 
Securitisation Swaps is a complete practitioner's guide to this unique and complex class of derivatives. This detailed examination follows the entire life cycle of securitisation swaps to give quants, structurers, traders, originators, issuers and lawyers a common reference for understanding their shared objective. Broad in scope to provide a common-ground perspective -- yet detailed enough to promote full understanding -- the discussion takes a distinctly cross-disciplinary approach that encompasses the multi-faceted knowledge base required to successfully execute these complex trades.
 
Despite the fact that the size of the market is trillions of dollars in notional principal, securitisation swaps have thus far been neglected in both academic and practitioner literature. The numerous stakeholders that work together on these complex deals will all greatly benefit from a thorough understanding of their underlying risks and gain deep insight into the perspectives of each stakeholder. This invaluable guide provides multi-disciplinary insight that allows practitioners to:
* Manage securitisation swaps more effectively, from pre-trade structuring and modelling to post-trade risk management and accounting
* Understand the elements of securitisation and covered bonds, and how swaps mitigate risk in these types of transactions
* Explore how securitisation swaps differ from other derivatives and delve into their three specific risk factors -- swap prepayment risk, swap extension risk and downgrade risk
* Learn practical methods and strategies of risk management, accounting, pricing and transaction execution
 
When securitisation trades go wrong, they become front-page news -- but when each participant understands accurate modelling, risk mitigation, optimal structuring, costs, pricing, commercial backgrounds and other integral practices, they are able to work together to achieve a shared objective. Securitisation Swaps provides the essential knowledge that streamlines and safeguards these important trades.

Table des matières

About the Author xiii
 
Foreword xv
 
Acknowledgements xix
 
Chapter 1
 
Introduction 1
 
Chapter 2
 
Overview of Structured Funding 5
 
Funding 5
 
Funding Instruments 7
 
Securitisation 8
 
The Securitisation Process 8
 
Structured Funding Participants 9
 
Asset and Cash Flow Transformation 16
 
Summary of Securitisation 18
 
Master Trusts 18
 
Securitisation and the GFC 21
 
Covered Bonds 22
 
Documentary Framework 24
 
Offer Document 24
 
Subscription Agreement 25
 
Sale Agreement 25
 
Trust Documentation 25
 
Servicing Agreement 27
 
Swaps 27
 
Ancillary Service Provider Documentation 28
 
Structured Funding Markets 31
 
Risks 32
 
Credit Risk 32
 
Market Risk 32
 
Liquidity Risk 33
 
Prepayment Risk 33
 
Extension Risk 34
 
Downgrade Risk 34
 
Operational Risk 35
 
Legal Risk 35
 
Chapter 3
 
Asset-Backed Debt Structures 37
 
Loan Pool Dynamics 37
 
Derivation of Eq. (3.1) 38
 
Pool Amortisation 42
 
Securitisation Structures 42
 
Standalone Structures with Pass-Through Tranches 42
 
Standalone Structures with Bullet Tranches 47
 
Standalone Structures with Controlled Amortisation Tranches 48
 
Tranche Conservation Laws 49
 
Master Trust RMBS Structures 50
 
Credit Card ABS Structures 55
 
Covered Bond Structures 57
 
Hard Bullets 57
 
Extendible Maturity Structures 58
 
Comparison of Structures 59
 
Chapter 4
 
Swaps in Structured Funding 61
 
An Overview of Vanilla Swaps 61
 
Interest Rate Swaps 61
 
Cross-Currency Swaps 64
 
Vanilla Swap Pricing 66
 
Asset Swaps 68
 
Liability Swaps 70
 
Standby Swaps 72
 
Swap Priority and Flip Clauses 74
 
Chapter 5
 
Swap Prepayment Risk 79
 
What is Swap Prepayment Risk? 79
 
The Expected Swap Schedule 80
 
Balance Guarantee Swaps 83
 
Re-Hedging 84
 
What Factors Drive Prepayment Rates? 90
 
Monte Carlo Modelling of Swap Prepayment Risk 91
 
Working with a Mixed Measure 92
 
Modelling Prepayment 93
 
Modelling the Market Risk Factors 96
 
Simulation Methodology 97
 
Greeks, Hedging and VaR 103
 
Computing Greeks 103
 
Hedging 104
 
Value-at-Risk 106
 
XVA 108
 
Computing XVA for Swaps with Prepayment Risk 108
 
Intermediated Asset Swaps 109
 
Mitigation Strategies 110
 
Risk Transfer 110
 
Controlled Amortisation Structures 111
 
Reducing Prepayment Volatility via Diversification 112
 
Due Diligence and Surveillance 114
 
Duty of Continuous Disclosure 115
 
Step-Ups 116
 
System Issues and Whole-of-Life Deal Management 116
 
Trade Capture 116
 
Trade Maintenance 117
 
Risk Systems 118
 
Chapter 6
 
Swap Extension Risk 119
 
What is Swap Extension Risk? 119
 
Examples of Extension Risk 121
 
Dependence on the Capital Structure: Standalone SPVs 126
 
Extension Risk in UK RMBS Master Trusts 127
 
Covered Bond Extension Risk 127
 
A Simple Pricing Framework for 1-Factor Stochastic FX 128
 
Full Pricing Framework in a Multi-Factor Setting 132
 
Mitigation Strategies 133
 
Pre-Trade Structuring v

A propos de l'auteur

MARK AARONS is Head of Investment Risk at a leading Australian funds manager and an Adjunct Associate Professor in the Centre for Quantitative Finance and Investment Strategies at Monash University. Previously he was Head of FICC Structuring at the National Australia Bank, where he built a leading securitisation swap business in both Australia and the UK. VLAD ENDER is a director at Kauri Solutions, a financial markets consulting practice. Prior to founding Kauri Solutions, he spent eight years at National Australia Bank's London office. He also served as an Executive Director in the FICC Structuring team. ANDREW WILKINSON is a senior legal counsel in Australia who specialises in bespoke derivatives and securitisation. Previously, Andrew spent a decade in London working through the financial crisis and beyond for leading law firms Linklaters LLP and Weil, Gotshal & Manges.

Résumé

Develop the skillset essential to successful securitisation swaps management

Securitisation Swaps is a complete practitioner's guide to this unique and complex class of derivatives. This detailed examination follows the entire life cycle of securitisation swaps to give quants, structurers, traders, originators, issuers and lawyers a common reference for understanding their shared objective. Broad in scope to provide a common-ground perspective -- yet detailed enough to promote full understanding -- the discussion takes a distinctly cross-disciplinary approach that encompasses the multi-faceted knowledge base required to successfully execute these complex trades.

Despite the fact that the size of the market is trillions of dollars in notional principal, securitisation swaps have thus far been neglected in both academic and practitioner literature. The numerous stakeholders that work together on these complex deals will all greatly benefit from a thorough understanding of their underlying risks and gain deep insight into the perspectives of each stakeholder. This invaluable guide provides multi-disciplinary insight that allows practitioners to:
* Manage securitisation swaps more effectively, from pre-trade structuring and modelling to post-trade risk management and accounting
* Understand the elements of securitisation and covered bonds, and how swaps mitigate risk in these types of transactions
* Explore how securitisation swaps differ from other derivatives and delve into their three specific risk factors -- swap prepayment risk, swap extension risk and downgrade risk
* Learn practical methods and strategies of risk management, accounting, pricing and transaction execution

When securitisation trades go wrong, they become front-page news -- but when each participant understands accurate modelling, risk mitigation, optimal structuring, costs, pricing, commercial backgrounds and other integral practices, they are able to work together to achieve a shared objective. Securitisation Swaps provides the essential knowledge that streamlines and safeguards these important trades.

Détails du produit

• Auteurs: Aarons, M Aarons, Mar Aarons, Mark Aarons, Mark Ender Aarons, Vla Ender, Vlad Ender, Andrew Wilkinson, Wilkinson Andrew
• Edition: Wiley, John and Sons Ltd
• Langues: Anglais
• Format d'édition: Livre Relié
• Sortie: 31.12.2018
• EAN: 9781119532279
• ISBN: 978-1-119-53227-9
• Pages: 232
• Thèmes: Wiley Finance; Wiley Finance Editions; The Wiley Finance Series; Wiley Finance; Wiley Finance Editions
• Catégories: Sciences sociales, droit, économie > Economie > Economie privée; Finanzwesen, finanzprodukte, Finance & Investments, Finanz- u. Anlagewesen, Financial Products, Spezialthemen Finanz- u. Anlagewesen, Finance & Investments Special Topics