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WildspitzE
05-17-09, 11:48 PM
Pursuant to a recommendation made by a couple of fellow members, I’m starting this thread to kick off a dialogue about securitization. Not sure if anybody else thinks this is productive or necessary, but let’s see how it plays out. I’d like to encourage other folks with relevant knowledge to participate so that we can all benefit from the dialogue.

I’ll do my best to answer questions as best as I can. That said, most of my experience is in the emerging markets (in jurisdictions outside of the US, although I used to lead these product and capital market development programs from NY). The large players, structures, objectives, methodologies, etc. are pretty much the same, however, I may be a little rusty on some of the legal and accounting details that are applicable to US issuers / structures.

Given the complexity, I wasn’t sure about how best to begin this thread. My initial thought was to go through a basic securitization structure, modeling process, and conceptual review to form a knowledge base. I then thought about creating a simplified fictional example, and go through the structuring process from birth to death to create such knowledge base – to try to replicate how the youngling securitization professionals learn this business. But…then I remembered my audience.

I know that you all are way ahead of the pack when it comes to researching the world around you. I wasn’t sure if starting the way I had initially thought would add any value. Thus, I’m asking those of you interested in this topic to tell me what or how they’d like to learn, or what they'd like to talk about re: securitization. I still think that a good place to start is at the beginning, creating a simplified contextual base before we add complexity. It also provides a framework to better understand where the flaws in the process exist and where the abuses can and/or do take place.

I firmly believe that if a person can’t explain how something works simply, that person simply doesn’t really understand it. Or, alternatively, be weary of those that try to elucidate through technical jargon. Securitization and structured finance are littered with technical jargon to hide behind. I’ll try my best to present things as clearly as I can through this medium (and the limits of time), but also define the technical terms so that when you read more about the subject it will be more accessible.

So, any ideas where you’d like to start?

Chris Coles
05-18-09, 06:54 AM
The immediate answer is that you must follow your own instincts. From my point of view, no one has all the answers and in writing about anything, the writer, as much as anyone, learns new things from the exercise. That new thinking springs from the process. So let rip and surprise yourself.

jiimbergin
05-18-09, 07:01 AM
Given the complexity, I wasn’t sure about how best to begin this thread. My initial thought was to go through a basic securitization structure, modeling process, and conceptual review to form a knowledge base. I then thought about creating a simplified fictional example, and go through the structuring process from birth to death to create such knowledge base – to try to replicate how the youngling securitization professionals learn this business. But…then I remembered my audience.

So, any ideas where you’d like to start?

I think your initial idea is a good way to start. Then we all have the same base to work from.

jim

Thailandnotes
05-18-09, 08:42 AM
This is the scam to me...

"Issuers of structured finance
products were eager to have their new products rated on the same scale as bonds so that investors subject to ratings-based constraints would be able to purchase the securities. By having these new securities rated, the issuers created an illusion of comparability with existing “single-name”securities. This provided access to a large pool of potential buyers for what otherwise would have been perceived as very complex derivative securities."

http://www.hbs.edu/research/pdf/09-060.pdf