Financial Management of Structured Products

The course provides a detailed overview of the financial management of structured product transactions. The parameters of structured product deals will be explored; because of the elevated levels of market and operational risk, the course creates guidelines for the assessment framework needed to manage risk. In addition, the course incorporates a discussion of FASB rules regarding accounting for variable interest entities, accounting for warehouses and Basel II guidelines for regulatory capital requirements.



Securitization market practitioners, portfolio risk managers, corporate financiers, treasurers, credit risk managers, traders.
No advance preparation required.
Students will be able to:
  • Understand and analyze the securitization process for structured products
  • Gain a conceptual and analytical framework for collateralized debt obligations (CDOs)
  • Develop managerial mechanisms for CDO financial oversight
  • Identify major accounting and control methods for structured products
A basic knowledge of derivatives and capital markets.
"The course clearly presented the application of CDOs."
"This course presents a good analysis of pricing models."
"The instructor is a strength of this course."
  • Structured Credit Modeling
  • Accounting for Derivatives & Hedging
  • Day 1
    Overview of Structured Finance
    • What is structured finance?
    • Who are the market participants?
    • Motivation for structured finance
    • Mortgages
    • Credit card accounts
    • Auto loans
    • Lease receivables

    Introduction to Securitization

    • Mechanics of a securitization transaction
    • Roles & responsibilities of participants to a securitization
    • Cash vs. synthetic securitization
    • Size of securitization markets

    Credit Swaps, Synthetic ABS

    • Types of CDS
    • Uses of CDS
    • Pricing of CDS
    • Disadvantages of CDS
    • Synthetic ABS/CDOs

    Assessing Securitization Risk: A Structurer's Perspective

    • Credit risk of underlying assests
    • Credit spreads
    • Subordination
    • Legal issues: True sales vs. bankruptcy remoteness

    Securitization and Cost of Capital

    • CAPM and cost of equity capital
    • Cost of debt capital
    • Weighted average cost of capital - WACC
    • Capital regulation capital under Basel II

    Day 2
    Collateralized Debt Obligations (CDOs)
    • Distinction of CDO from ABS/MBS
    • Taxonomy of CDO types
    • Transaction structure of CDOs: Tranches, Triggers, Overcollateralization and Reserving
    • Cash vs. synthetic CDOs: Funding, cash-flow waterfall, structuring

    Analyzing CDOs

    • Structural models of default probability
    • Loss curves
    • Modeling cash-flow CDOs: Moody's binomial expansion technique
    • Rating transition matrices
    • What is a Moody's rating?
    • Monitoring and rating actions

    Accounting for Securitizations

    • Accounting example for a securitization
    • Sale criteria for securitization transaction
    • What are Variable Interest Entities (VIEs)?
    • FAS 140
    • FAS 156
    • Applying FIN 46(R)
    • FAS 155
    • Accounting for warehouses

    International Developments

    • Hedge funds' activities involving structured finance
    • New international accounting standard - IFRS

    Q&A Session

    Clients who register for this course will receive a complimentary 4-month subscription to FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. The move to the electronic version follows an ongoing review of our environmental responsibilities as a global business and as part of the Pearson group. FT.com also has features that are not available in hard copy, such as: Special Reports, Alphaville, editor blogs, education sections and much more! Subscriptions will start within 6-8 weeks of the start of class and are limited to one subscription per client. (Please note: as of May 1, 2011, the electronic subscription replaces the hard-copy 3-month Financial Times subscription.)

    Lunch is included for all students taking day classes.