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An Introduction to Asset-Backed Securities

A beginners guide to Asset Backed Securities, Mortgage Backed Securities, Collateralized Debt Obligations etc
4.6 (38 ratings)
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3,721 students enrolled
Created by Tanuja Yadav
Last updated 4/2016
English
Free
Includes:
  • 2 hours on-demand video
  • 3 Supplemental Resources
  • Full lifetime access
  • Access on mobile and TV
  • Certificate of Completion
What Will I Learn?
explain benefits of securitization for economies and financial markets;
describe securitization, including the parties involved in the process and the roles they play;
describe typical structures of securitizations, including credit tranching and time tranching;
describe types and characteristics of residential mortgage loans that are typically securitized;
describe types and characteristics of residential mortgage-backed securities, including mortgage pass-through securities and collateralized mortgage obligations, and explain the cash flows and risks for each type;
define prepayment risk and describe the prepayment risk of mortgage-backed securities;
describe characteristics and risks of commercial mortgage-backed securities;
describe types and characteristics of non-mortgage asset-backed securities, including the cash flows and risks of each type;
describe collateralized debt obligations, including their cash flows and risks.
View Curriculum
Requirements
  • Basic understanding of Fixed income instruments is good to have
  • Access to a computer / android with internet access is required
Description

This course discusses the benefits of securitization, describes securitization, and explains the investment characteristics of different types of Asset Backed Securities (ABS). The terminology regarding ABS varies by jurisdiction. A mortgage-backed security (MBS) is an ABS backed by a pool of mortgages, and a distinction is sometimes made between MBS and ABS backed by non-mortgage assets. This distinction is common in the United States, for example, where typically the term “mortgage-backed securities” refers to securities backed by high-quality real estate mortgages and the term “asset-backed securities” refers to securities backed by other types of assets. Because the US ABS market is the largest in the world, much of the discussion and many examples in this reading refer to the United States.

This course will help the student understand the importance of securitization from a macroeconomic perspective. I will be discussing the benefits of securitization for economies and financial markets, talking about   securitization and identifying the parties involved in the process and their roles. I shall also discusses typical structures of securitizations, including credit tranching and time tranching. Further more, I will be talking about securities backed by mortgages for real estate property, focusing on the types of residential mortgage designs, residential MBS and commercial MBS, respectively. I will conclude the course with a lecture on  Collateralized debt obligations. 

This course is very useful for anyone interested in entering the Fixed Income field of Investments, especially those entering the ABS arena. 

Who is the target audience?
  • Students interested in learning about Fixed Income instruments
  • Students who would like to learn about ABS, MBS, CBOs and other financial instruments issued through securitization
  • This is a sub topic of "Fixed Income Fundamentals" and is taught with that subject, so any one enrolled in that course doesn't need to enroll separately for this course
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Curriculum For This Course
Expand All 13 Lectures Collapse All 13 Lectures 02:00:20
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INTRODUCTION
2 Lectures 06:40

This lecture introduces the instructor

Introduction
01:12

This lecture takes you through the flow of the course

Flow of the course and topics covered
05:28
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BENEFITS OF SECURITIZATION FOR ECONOMIES AND FINANCIAL MARKETS
1 Lecture 05:48

The securitization of pools of loans and receivables into multiple securities provides economies and financial markets with a number of benefits that are discussed in this lecture.

Benefits of Securitization
05:48
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HOW SECURITIZATION WORKS
3 Lectures 25:44

When assets are securitized, several legal and regulatory conditions must be satisfied. A number of parties participate in the process to facilitate the transaction and ensure these conditions are met. In this section, a typical securitization is described by way of a hypothetical example. 

An Example of a Securitization
07:44

This lecture describes the parties involved in a securitization and their roles. 

Parties to a Securitization and Their Roles
04:43

This lecture introduces the typical structures of securitizations, such as credit tranching and time tranching and the Role of a Special Purpose Entiry (SPE)

Structure of a Securitization and Key Role of the Special Purpose Entity
13:17
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Mortgage Backed Securities
4 Lectures 01:00:40

Before understanding Residential Mortgage backed Securities, it is essential to understand the defining features of the assets behind RMBS - Residential Mortgage Loans. This lecture helps the students understand the same.

Residential Mortgage Loans: defining features
15:15

The bonds created from the securitization of mortgages related to the purchase of residential properties are residential mortgage-backed securities (RMBS). Securities backed by residential mortgages are divided into three sectors: 

(1) those guaranteed by a federal agency, 

(2) those guaranteed by a GSE, and 

(3) those issued by private entities and that are not guaranteed by a federal agency or a GSE. 

The first two sectors are referred to as agency RMBS, and the third sector as non-agency RMBS.

This lecture talks about agency RMBS, specifically mortgage pass-through securities.

Residential Mortgage Backed Securities
16:20

CMOs are created by redistributing the cash flows of mortgage-related products, including mortgage pass-through securities, to different bond classes or tranches on the basis of a set of payment rules

Collateralized Mortgage Obligations
16:37

Commercial mortgage-backed securities (CMBS) are backed by a pool of commercial mortgages on income-producing property, such as multifamily properties (e.g., apartment buildings), office buildings, industrial properties (including warehouses), shopping centers, hotels, and health care facilities (e.g., senior housing care facilities). The collateral of is a pool of commercial loans that were originated either to finance a commercial purchase or to refinance a prior mortgage obligation.

Commercial Mortgage-Backed Securities
12:28
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Non Mortgage Asset backed Securities
3 Lectures 21:28

Auto loan ABS are backed by auto loans and lease receivables. The focus in this lecture is on the largest type of auto securitizations—that is, auto loan-backed securities. This lecture also talks about Credit card receivables that are used as collateral for the issuance of credit card receivable ABS.

ABS backed by Auto Loans and Credit Card receivables
09:25

A collateralized debt obligation (CDO) is a generic term used to describe a security backed by a diversified pool of one or more debt obligations (e.g., corporate and emerging market bonds, leveraged bank loans, ABS, RMBS, and CMBS).

Collateralized Debt Obligations
11:23

Multiple choice based on CFA pattern

Test your knowledge
11 questions

Bonus Lecture: Coupon codes and Access to free courses
00:40
About the Instructor
4.4 Average rating
288 Reviews
10,082 Students
17 Courses
Chartered Financial Analyst

A CFA charter holder, I have extensive experience in the field of F&A outsourcing and have worked on various projects within the F&A Arena. I have 11 years of experience in F&A delivery, handling end to end finance and accounting processes, F&A practice and process improvement. I am also a visiting faculty with International College of Financial Planning, New Delhi where I have taken classes for CFA L 2 and 3. I have my own channel on Youtube on Finance and Investments.

Specialties: Finance, Fixed Income, Treasury, Accounts Payable, Accounts Receivables, Reconciliation, Fixed Asset and Project accounting, Solution development, F&A Training, SOX testing, Fraud risk assessment and Process streamlining.

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