Book description
Introduction to Securitization
outlines the basics of securitization, addressing applications for this
technology to mortgages, collateralized debt obligations, future flows,
credit cards, and auto loans. The authors present a comprehensive
overview of the topic based on the experience they have gathered through
years of interaction with practitioners and graduate students around the
world. The authors offer coverage of such key topics as: structuring
agency MBS deals and nonagency deals, credit enhancements and sizing,
using interest rate derivatives in securitization transactions, asset
classes securitized, operational risk factors, implications for
financial markets, and applying securitization technology to CDOs.
Finally, in the appendices, the authors provide an essential
introduction to credit derivatives, an explanation of the methodology
for the valuation of MBS/ABS, and the estimation of interest rate
risk.
Securitization is a financial technique that pools assets
together and, in effect, turns them into a tradable security. The end
result of a securitization transaction is that a corporation can
obtain proceeds by selling assets and not borrowing funds. In real
life, many securitization structures are quite complex and enigmatic
for practitioners, investors, and finance students. Typically, books
detailing this topic are either too lengthy, too technical, or too
superficial in their presentation. Introduction to Securitization is
the first to offer essential information on this topic at a
fundamental, yet comprehensive level-providing readers with a working
understanding of what has become one of today's most important areas
of finance.
Authors Frank Fabozzi and Vinod Kothari, internationally recognized
experts in the field, clearly define securitization, contrast it with
corporate finance, and explain its advantages. They carefully
illustrate the structuring of asset-backed securities (ABS)
transactions, including agency mortgage-backed securities (MBS) deals
and nonagency deals, and show the use of credit enhancements and
interest rate derivatives in such transactions. They review the
collateral classes in ABS, such as retail loans, credit cards, and
future flows, and discuss ongoing funding vehicles such as
asset-backed commercial paper conduits and other structured vehicles.
And they explain the different types of collateralized debt
obligations (CDOs) and structured credit, detailing their structuring
and analysis. To complement the discussion, an introduction to credit
derivatives is also provided.
The authors conclude with a close look at securitization's impact on
the financial markets and the economy, with a review of the now
well-documented problems of the securitization of one asset class:
subprime mortgages. While questions about the contribution of
securitization have been tainted by the subprime mortgage crisis, it
remains an important process for corporations, municipalities, and
government entities seeking funding. The significance of this
financial innovation is that it has been an important form of raising
capital for corporations and government entities throughout the world,
as well as a vehicle for risk management. Introduction to
Securitization offers practitioners and students a simple and
comprehensive entry into the interesting world of securitization and
structured credit.
Frank J. Fabozzi, PhD, CFA, CPA, is Professor in the Practice of
Finance at Yale University's School of Management, Editor of the
Journal of Portfolio Management, and Associate Editor of the Journal
of Structured Finance and the Journal of Fixed Income.
Vinod Kothari, chartered accountant, is an author, trainer, and
consultant on securitization, asset-based finance, credit derivatives,
and derivatives accounting. Kothari is a visiting faculty member at
the Indian Institute of Management, where he teaches structured
finance.
