The ability to accurately price and value securitized products is a cornerstone of success for investors, traders, and risk managers in today's financial markets. As these complex instruments—ranging from mortgage-backed securities to collateralized loan obligations—become more prevalent, a sophisticated understanding of their underlying drivers is essential. This training course is designed to take you beyond the basics, equipping you with the analytical frameworks and practical modeling skills needed to navigate the nuances of deal structures, cash flow waterfalls, and market dynamics that dictate a security's true value.

This intensive 10-day program will provide you with the comprehensive toolkit required to master the pricing and valuation process. We will explore advanced topics such as the impact of prepayment and default risk, the role of credit enhancement, and the application of modern analytics to assess relative value. Through hands-on exercises and detailed case studies, you will learn to build, interpret, and validate valuation models, enabling you to make confident and well-founded investment decisions. By the end of this course, you will be proficient in dissecting even the most complex structured products and identifying mispricing opportunities in the market.

Duration

10 days

Target Audience

• Fixed-income analysts and traders
• Portfolio managers and asset managers
• Risk management professionals
• Structured finance professionals
• Financial modelers and quantitative analysts
• Credit analysts and research associates
• Investment bankers and underwriters

Objectives

• Understand the foundational principles of securitization pricing.
• Master various valuation methodologies and models for different asset classes.
• Develop advanced cash flow and prepayment modeling skills.
• Analyze the impact of credit risk and deal structure on pricing.
• Grasp the role of credit ratings and third-party analysis in valuation.
• Learn to conduct scenario analysis and stress testing on securitized products.
• Identify and assess key market drivers and liquidity factors.
• Gain proficiency in using industry-standard pricing and analytics tools.
• Develop a framework for performing relative value analysis.

Course Modules

Module 1: Foundations of Securitization Valuation

• An overview of the key components of a securitized deal from a valuation perspective.
• The motivations for securitization and its impact on pricing.
• Introduction to the yield and spread concepts in structured finance.
• Understanding the lifecycle of a securitized product.
• The importance of cash flow analysis in valuation.

Module 2: Cash Flow and Waterfall Modeling

• A deep dive into modeling the cash flow waterfall.
• The mechanics of principal and interest distributions to different tranches.
• The impact of trigger events and performance tests on the cash flow waterfall.
• Building a basic waterfall model from scratch in a spreadsheet.
• Interpreting the output of a waterfall model for valuation purposes.

Module 3: Prepayment and Default Modeling

• Understanding the drivers of prepayment risk for various asset types.
• The use of standard prepayment models like PSA and CPR.
• An in-depth look at default risk and loss severity.
• How to incorporate prepayment and default assumptions into valuation models.
• The role of historical data and macroeconomic factors in modeling.

Module 4: Residential Mortgage-Backed Securities (RMBS)

• Valuation techniques specific to agency and non-agency RMBS.
• The role of prepayment and extension risk in RMBS pricing.
• Analyzing the impact of mortgage refinancing on cash flows.
• The use of duration and convexity for managing RMBS portfolios.
• A case study on valuing an RMBS bond in a changing interest rate environment.

Module 5: Commercial Mortgage-Backed Securities (CMBS)

• The unique valuation challenges of CMBS.
• Analyzing the underlying collateral and property-level characteristics.
• The importance of the servicer and special servicer in CMBS valuation.
• A deep dive into credit enhancement and structural features.
• A practical case study on pricing a CMBS bond.

Module 6: Asset-Backed Securities (ABS)

• An overview of the diverse world of ABS (e.g., auto loans, credit cards, student loans).
• Valuation methodologies tailored to different ABS collateral types.
• The impact of consumer credit behavior on ABS performance and pricing.
• Understanding the role of payment holidays and forbearance.
• A case study on valuing a portfolio of auto loan ABS.

Module 7: Collateralized Loan Obligations (CLOs)

• A detailed exploration of CLO valuation models and methodologies.
• The role of the collateral manager and the impact on performance.
• Analyzing the credit quality and diversity of the leveraged loan pool.
• The use of Monte Carlo simulation for CLO valuation.
• The impact of interest rate changes and credit spreads on CLO tranches.

Module 8: Credit Enhancement and Structural Features

• An in-depth analysis of different types of credit enhancement.
• The role of subordination, overcollateralization, and reserve accounts.
• How credit enhancement impacts the pricing of different tranches.
• Understanding triggers and their effect on cash flow and valuation.
• The importance of deal structure in mitigating risk.

Module 9: The Role of Credit Ratings

• A critical look at the role of credit rating agencies in securitization.
• Understanding how ratings are assigned and monitored.
• The limitations of credit ratings in the valuation process.
• How to conduct independent credit analysis to supplement ratings.
• The impact of rating downgrades on market price.

Module 10: Market Dynamics and Pricing Factors

• The role of liquidity and trading volume in securitization pricing.
• The impact of market sentiment and investor demand.
• Understanding spread compression and widening.
• The influence of macroeconomic trends and central bank policies.
• A practical session on using market data to inform pricing decisions.

Module 11: Scenario Analysis and Stress Testing

• Designing effective stress tests for securitized portfolios.
• The impact of economic recessions and asset price shocks on valuations.
• Running "what-if" scenarios to test model robustness.
• Interpreting stress test results for risk management and capital allocation.
• The use of regulatory frameworks for stress testing.

Module 12: Advanced Valuation Methodologies

• An introduction to more sophisticated valuation techniques.
• Using option-adjusted spread (OAS) analysis for prepayment-sensitive securities.
• The application of binomial and Monte Carlo models.
• Valuing non-traditional securitized products (e.g., synthetic CDOs).
• Understanding the nuances of valuing floating-rate tranches.

Module 13: Relative Value Analysis

• Developing a framework for comparing the value of different deals.
• Identifying mispricing opportunities across different asset classes.
• The use of spread curves and historical data in relative value analysis.
• Comparing new issuance to seasoned securities.
• A practical exercise on identifying arbitrage opportunities.

Module 14: Technology and Tools for Valuation

• An overview of industry-standard pricing and analytics platforms.
• The use of programming languages (e.g., Python, R) for advanced modeling.
• The role of data providers and third-party valuation services.
• Building and managing a valuation model infrastructure.
• The future of AI and machine learning in securitization valuation.

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 7 working days before commencement of the training.