Structured Products and Related Credit Derivatives: A Comprehensive Guide for Investors (Frank J. Fabozzi Series) - Hardcover

Lancaster, Brian P.; Schultz, Glenn M.; Fabozzi, Frank J.

Hardcover

ISBN 10: 0470129859 ISBN 13: 9780470129852

Verlag: Wiley, 2008

Inhaltsangabe

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.

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Über die Autorin bzw. den Autor

Brian P. Lancaster is Head of Structured Products Research at Wachovia. Prior to joining Wachovia, Lancaster was a managing director (principal) in structured products at Bear, Stearns & Co. Inc. from 1990 to 2001.

Glenn M. Schultz, MBA, is Managing Director and Head of ABS and Non-Agency Mortgage Research for Wachovia Capital Markets, LLC. Prior to joining Wachovia, Schultz was a managing director and head of residential ABS investment banking, managing the residential ABS and MBS businesses of the royal bank of Canada Financial Group.

Frank J. Fabozzi, PHD, CFA, is Professor in the Practice of Finance and Becton Fellow at Yale University's School of Management and the Editor of the Journal of Portfolio Management.

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Structured products and Related credit derivatives

With new structured asset products continuously being introduced to today's markets, it's important for experienced and aspiring investors to understand the essential aspects of these financial instruments. Structured Products and Related Credit Derivatives can help you achieve this goal.

Filled with the in-depth insights and expert advice of numerous experienced contributors and edited by financial professionals Brian Lancaster, Glenn Schultz, and Frank Fabozzi Structured Products and Related Credit Derivatives puts this complex field in perspective.

Divided into five comprehensive sections, this informative guide:

• Provides an accessible account of the different types of asset-backed securities (ABS), including residential, auto, and ABS credit derivatives

• Addresses issues in the collateralized debt obligations (CDO) market through discussions of CDO equity, middle market CDOs, and commercial real estate

• Examines commercial ABS components such as aircraft securitization, intermodal equipment, and life insurance reserve securitization

• And much more

With the world of structured products and credit derivatives constantly evolving, you need to have a firm understanding of how to effectively operate in such a dynamic environment. The information found throughout these pages will help you do this, and much more, as you go about your everyday investment endeavors.

Aus dem Klappentext

While legitimate concerns have recently surfaced with regard to structured products and their markets, the fact is that close to ninety-five percent of structured products have proven themselves to be stable credit quality securities with upgrade/downgrade ratios equal to or better than the corporate bond market.

Beyond the generally high quality of these investments, structured finance has played a critical role in improving the efficiency, liquidity, and availability of capital in both the United States and abroad, and allowed for the distribution of risk to a wider variety of financial institutions than could otherwise be achieved through traditional balance sheet lending.

Brian Lancaster, Glenn Schultz, and Frank Fabozzi know what it takes to make it in this dynamic environment, and now, with the help of numerous experienced contributors, they take a detailed look at the various aspects of structured assets and credit derivatives.

Divided into five comprehensive sections, Structured Products and Related Credit Derivatives opens with an engaging introduction of this field and quickly moves on to:

• Provide an analysis of one of the most controversial topics in the entire structured products market: structured finance operating companies (SFOCs)

• Examine various consumer asset-backed securities (ABS), from residential and auto to small business and student loans

• Offer valuable insights into one of the most misunderstood areas of structured products collateralized debt obligations (CDOs) and their many forms

• Cover the commercial real estate sector through in-depth discussions of CMBS, commercial real estate CDOs, and much more

• Explore commercial ABS issues such as aircraft securitization, intermodal equipment, and life insurance reserve securitization

Written over a period spanning the greatest bull market in structured products history to arguably its most challenging period, this reliable resource will help serious investors identify the opportunities and mitigate the risks in this complex financial market.

BRIAN P. LANCASTER is Head of Structured Products Research at Wachovia. Prior to joining Wachovia, Lancaster was a managing director (principal) in structured products at Bear, Stearns & Co. Inc. from 1990 to 2001.

GLENN M. SCHULTZ, MBA, is Managing Director and Head of ABS and Non-Agency Mortgage Research for Wachovia Capital Markets, LLC. Prior to joining Wachovia, Schultz was a managing director and head of residential ABS investment banking, managing the residential ABS and MBS businesses of the Royal Bank of Canada Financial Group.

FRANK J. FABOZZI, PhD, CFA, is Professor in the Practice of Finance and Becton Fellow at Yale University's School of Management and the Editor of the Journal of Portfolio Management.

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Structured Products and Related Credit Derivatives

A Comprehensive Guide for InvestorsBy Brian P. Lancaster Glenn M. Schultz Frank J. Fabozzi

John Wiley & Sons

Copyright © 2008 Brian P. Lancaster
All right reserved.
ISBN: 978-0-470-12985-2

Chapter One

Introduction

Brian P. Lancaster Senior Analyst Wachovia Capital Markets, LLC

Glenn M. Schultz, CFA Senior Analyst Wachovia Capital Markets, LLC

Frank J. Fabozzi, Ph.D., CFA Professor in the Practice of Finance Yale School of Management

Since the summer of 2007 and as this book goes to press in late 2007, it has been difficult to ignore the news on television, in the print media, and online without one or more of the following financial instruments mentioned: "subprime ABS CDOs," "structured finance products," and "credit derivatives." Even the popular web siteYouTube.com has seen the posting of numerous comedy skit videos and music videos about these financial instruments.

This greater awareness of the new media, comedians, and would-be musicians was obviously due to the 2007 subprime residential mortgage-backed security crisis. These terms have been referred to in some media reports as financial "toxic waste." While real credit issues have surfaced in subprime ABS and some CDOs, it is important to keep the current turmoil roiling the structured product markets in perspective. Securitized subprime mortgage backed securities represent 6% of the approximately $10 trillion structured products markets which consists of a wide variety of assets ranging from commercial real estate loans, to credit card debt to equipment leases, most of which have performed as well as if not better than equivalent rated corporate bonds. Put another way 94% or about $9.4 trillion of structured products have generally been money good, stable credit quality securities with upgrade downgrade ratios equal to or better than the corporate bond market.

Beyond the generally high quality of the investments, structured finance has played a critical role in improving the efficiency, liquidity, and availability of capital in the United States and abroad. At the simplest level through the transformative powers of statistical analysis and credit tranching, structured products efficiently connect pools of capital around the world to various financial markets and assets that heretofore only had access to localized specialty lenders. Borrowers are provided with the best possible borrowing rates and investors are provided with greater and more diverse investment opportunities to maximize their investment performance. Moreover, structured products allow for the distribution of risk to a wider variety of financial institutions both domestically and internationally than could otherwise be achieved through traditional balance sheet lending, a feature not lost on regulatory authorities.

The four obvious risks in the structured product endeavor are that (1) the rating agencies, the main arbiter of asset and bond credit quality get it wrong; (2) the originators of the original assets turn into "toll takers" not caring about credit quality but only fees; (3) the investors don't understand the risks and opportunities embedded in the securities they are acquiring; and (4) risk transfer and dispersion is not actually as clear cut as originally expected.

This book, written over a period spanning the greatest bull market in structured products history to arguably its most challenged period by some of Wall Street's top ranked and most seasoned analysts, offers the reader the unique insights that can only come from such a phenomenal roller coaster ride. With many structured finance spreads at or well beyond their historically widest spreads and defaults falling in some sectors and rising in others, there is more investment risk and opportunity in these markets than ever before. This comprehensive book is designed to help the reader identify the opportunities and mitigate the risks in what is perhaps the most fascinating and complex financial market in the world.

Section One of this book includes the forward, this introduction (Chapter 1) and Chapter 2 which provides an analysis of what is arguably one of the most critical and controversial topics in the entire structured products market: structured finance operating companies (SFOCs), which includes structured investment vehicles (SIVs) and structured lending vehicles (SLVs). SFOCs started in the late 1980s and have grown exponentially since 2002.

This chapter also analyzes vehicles of consumer asset backed securities (ABS), their role in the structured products markets as well as their trademark feature, dynamic leverage, which allows them to reduce or increase leverage in response to, or in anticipation of, market movements or collateral quality. SFOCs have purchased significant amounts of floating rate bonds across the structured products markets. In 2007, difficulties with these vehicles stemming from sector-level illiquidity and market value declines led to the effective closure of a range of structured products markets. To remain viable, SFOCs will need to learn from the events of 2007 and address both the liquidity and market value risks inherent in the structures.

Section Two (Chapters 3 through 8) starts off with analysis of residential asset-backed securities (RABS), the market at the center of the 2007 subprime mortgage crisis (Chapter 3). The market is covered from its inception in the 1990s through the creation of credit default swaps (CDSs) referencing RABS transactions. It includes a discussion of the loan level drivers of both voluntary repayment and default, providing an excellent starting point for anyone interested in modeling home equity loan cash flows. Combined with a detailed examination of the structures employed in a RABS securitization and a discussion of the mechanics of pay as you go CDSs, the chapter provides the investor with a solid understanding and methodology for valuing single-name CDS referencing RABS transactions.

Chapters 4 and 5 examine two of the largest and oldest nonresidential consumer ABS markets-credit-card-backed securities and auto-loan-backed securities. Each chapter serves as a guide to understanding the characteristics and credit quality of the respective underlying collateral as well as the structures that were adapted to suit the unique cash flow characteristics of the collateral. An investor approach to evaluating these securities as well as the delinquency and loss performance of credit cards, prime, near-prime, and subprime auto deals are also discussed.

The student-loan-backed securities sector, generally acknowledged as one of the most stable sectors of the ABS market, has grown at a steady pace as the cost of college education continues to rise and demand for loans has increased. In Chapter 6 securitization of both government-guaranteed student loans and private student loans are discussed. Generic structures and underlying collateral characteristics including prepayments and risk...

Details zur Ausgabe

• Verlag: Wiley
• Erscheinungsdatum: 2008
• Sprache: Englisch
• ISBN 10: 0470129859
• ISBN 13: 9780470129852
• Einband: Gebundene Ausgabe
• Auflage: 1
• Anzahl der Seiten: 544
• Kontakt zum Hersteller: Wiley-VCH GmbH; product_safety@wiley.com; ; Boschstrasse 12; Weinheim; 69469; Deutschland