Outlining Asset-Backed Securities Management (6B5)

After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Describe the Scope of Asset-Backed Securities Management

Asset-Backed Securities Management

Asset-Backed Securities - Overview

Asset-backed securities (ABS) and mortgage-backed securities (MBS) are securities for which payments are hedged with an asset pool. In the case of ABS, the asset pool contains receivables, whereas, in the case of MBS, the asset pool contains receivables hedged by a mortgage. ABS and MBS are generally securities repaid by installments that may change depending on how the borrows pay back the underlying loans, for example.

Main features of the Asset-backed securities and Mortgage-backed securities management include the portraying of installments calculated using the linear method or CPR or PSA methods.

Furthermore, it is possible to portray a period without repayments at the start of the term. To simplify the entry of the redemption schedule, you can copy the dates from a condition and apply them to the repayment flows by selecting the corresponding condition in the Redemption Template field.

The repayment schedule is versioned.

  • The system does not allow you to portray the securitization of the underlying receivables
  • Issue of ABS/MBS is not supported
  • A to-be-announced (TBA) trade for ABS/MBS is not supported

The system supports you from the purchase, through position management, including period-end closing, and reporting until the end of the term/sale of securities. In the class data, the conditions such as redemption schedule, calculation parameters, and interest conditions are versioned. Editable payment amounts are possible and risk-free rates are supported in variable interest conditions.

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