Securitisation Swaps

Develop the skillset essential to successful securitisation swaps management

Securitisation Swaps is a complete practitioner’s guide to this unique and complex class of derivatives. This detailed examination follows the entire life cycle of securitisation swaps to give quants, structurers, traders, originators, issuers and lawyers a common reference for understanding their shared objective. Broad in scope to provide a common-ground perspective — yet detailed enough to promote full understanding — the discussion takes a distinctly cross-disciplinary approach that encompasses the multi-faceted knowledge base required to successfully execute these complex trades.

Despite the fact that the size of the market is trillions of dollars in notional principal, securitisation swaps have thus far been neglected in both academic and practitioner literature. The numerous stakeholders that work together on these complex deals will all greatly benefit from a thorough understanding of their underlying risks and gain deep insight into the perspectives of each stakeholder. This invaluable guide provides multi-disciplinary insight that allows practitioners to:

• Manage securitisation swaps more effectively, from pre-trade structuring and modelling to post-trade risk management and accounting
• Understand the elements of securitisation and covered bonds, and how swaps mitigate risk in these types of transactions
• Explore how securitisation swaps differ from other derivatives and delve into their three specific risk factors — swap prepayment risk, swap extension risk and downgrade risk
• Learn practical methods and strategies of risk management, accounting, pricing and transaction execution

When securitisation trades go wrong, they become front-page news — but when each participant understands accurate modelling, risk mitigation, optimal structuring, costs, pricing, commercial backgrounds and other integral practices, they are able to work together to achieve a shared objective. Securitisation Swaps provides the essential knowledge that streamlines and safeguards these important trades.

MARK AARONS is Head of Investment Risk at a leading Australian funds manager and an Adjunct Associate Professor in the Centre for Quantitative Finance and Investment Strategies at Monash University. Previously he was Head of FICC Structuring at the National Australia Bank, where he built a leading securitisation swap business in both Australia and the UK.

VLAD ENDER is a director at Kauri Solutions, a financial markets consulting practice. Prior to founding Kauri Solutions, he spent eight years at National Australia Bank's London office. He also served as an Executive Director in the FICC Structuring team.

ANDREW WILKINSON is a senior legal counsel in Australia who specialises in bespoke derivatives and securitisation. Previously, Andrew spent a decade in London working through the financial crisis and beyond for leading law firms Linklaters LLP and Weil, Gotshal & Manges.

Praise for Securitisation Swaps "A timely and succinctly written handbook catering to all structured finance practitioners in any capacity. The authors are ambitious in their coverage of all stages in the lifecycle of securitisation swaps and their management. I highly commend this guide which helps to dispel the complexity underlying these instruments, providing practical guidance and strategies that practitioners can utilise every day." --Jamie Ng, Global Head of Finance, Funds and Restructuring, Ashurst "Securitisation swaps are a critical, yet neglected area of finance markets. Mark, Vlad and Andrew have made a clear, much needed addition to the literature, from an introduction to the basics, through to a detailed discussion of all the key risks and how a transaction is put together from start to finish." --Rohan Douglas, CEO, Quantifi, London "Mark, Vlad and Andrew have done an outstanding job in the quality and breadth of content and its sheer accessibility." --Chauncy Stark, Former General Manager, FX and Cross Asset Trading, National Australia Bank An Essential Guide to Understanding the Complexities of Securitisation Swaps Written by noted experts on the topic, Securitisation Swaps offers an authoritative yet practical guide to understanding and managing the life cycle of securitisation swaps. The handbook examines every step of the cycle from pre-trade structuring and modeling to transaction management through post-trade risk management and accounting. Securitisation Swaps explains how securitisation swaps are priced, what risks they carry and how the price and risk vary across the myriad structuring options. The handbook provides an introduction to the key elements of securitisation and covered bonds and explores how derivatives fit in this space. In general terms, the authors reveal the risk that derivatives mitigate in these transactions. Since securitisation swaps incorporate new risks and complexity into structured funding transactions, the book details how securitisation derivatives are different from other derivatives. It explores in depth the three specific risk factors which set them apart: prepayment risk, extension risk and downgrade risk. The handbook offers all the stakeholders working on a deal (quants, structurers, traders, originators, lawyers and risk professionals) a detailed explanation of the deal lifecycle and contains practical suggestions on risk management, accounting, pricing and transaction execution specifics.

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