Udemy
    •  
    •  
    •  
    •  
    •  
    •  
    •  
    •  
Subscribe
Turn what you know into an opportunity and reach millions around the world.
Learn More
Your cart is empty.
Keep shopping
Mastering MBS and ABS: From Basics to Advanced Analytics
Highest Rated
Rating: 4.8 out of 5(20 ratings)
46 students

Mastering MBS and ABS: From Basics to Advanced Analytics

From Fundamentals to Advanced Concepts in Securitizing, Trading and Investing in Mortgage and Asset-Backed Securities
Highest Rated
Created byTim Glauner
Last updated 5/2025
English
English [Auto],

What you'll learn

  • Understand securitization, the benefits, how it works, underlying assets, tranching and the roles of SPVs.
  • Types of Mortgage backed securities, pass-throughs, CMOs, TBAs and Mortgage Servicing rights (MSRs).
  • Structure of an ABS and how it differs from an MBS with a discussion of Collateralized Loan Obligations (CLOs).
  • Overview of prepayment and interest rate risk for MBS and credit and interest rate risk for ABS.
  • Prepayment speed measures and prepayment models.
  • Understand and derive the Current Coupon Rate which is the key factor for prepayment behavior.
  • Building blocks for analytics with curves and vols, prepayment/credit models, cashflow engines and a Monte Carlo simulation with stochastic interest rates.
  • Pricing of MBS and ABS with a static model and a stochastic interest rate model.
  • Course will touch upon Monte Carlo Standard errors.
  • Rationalize the concept of Option Adjusted Spread (OAS) to compensate for unhedged risks.
  • Explore convexity measure for portfolio returns and risk management.
  • How did securitization pay the major role in the 2008 Financial Crisis.
  • Lessons learned from the 2008 financial crisis and regulatory changes since then.

Course content

5 sections • 5 lectures • 3h 8m total length

  • Introduction and Course Outline12:33

    At the end of this section, students will have a foundational understanding of the class content. Due to the extensive nature of the material, Student will get an overview of various topics to grasp the big picture. This initial class is designed to introduce the lecture in a concise 12-minute format.


    The topics introduced are:

    1. Define Mortgage-Backed Securities (MBS) and Asset-Backed Securities (ABS).

    2. Explain the securitization process and its significance.

    3. Identify different types of assets used in securitization.

    4. Describe the function of Special Purpose Vehicles (SPV).

    5. Understand the concept of tranching and its role in risk management and investor demands.

    6. Discuss various credit enhancement techniques used in ABS and why Credit is not an issue for agency MBS.

    7. Analyze the risks associated with MBS and ABS, including prepayment, interest rate, and credit risks.

    8. Get an understanding into prepayment speeds and prepayment models in MBS.

    9. Get first exposure to pricing of MBS and ABS using static and stochastic pricing methods and the concepts of OAS and Convexity.

    10. Introduciton to the 2008 financial crisis and how securitization played its part.


    This is an introduction for the students to see what's to come.

Requirements

  • There are no specific pre-requisites and anyone will learn something about securitization. Some topics will be advanced so having had exposure to trading or risk management in fixed income related fields likely helps.

Description

Course Description: From Fundamentals to Advanced Concepts in Securitizing, Trading, and Investing in MBS and ABS

This course offers a comprehensive exploration of Mortgage-Backed (MBS) and Asset-Backed Securities (ABS), guiding participants from foundational principles to sophisticated analytical frameworks. The curriculum is meticulously designed for finance professionals, executives, traders, and students seeking deep insights into the securitization market.

Key Learning Objectives:

  1. Understanding Securitization: Learn how securitization transforms illiquid assets into tradable securities, redistributes risk, and enhances market liquidity.

  2. Asset Structures: Differentiate between MBS and ABS, including their structures, cash flows, and variants like Collateralized Mortgage Obligations (CMOs) and Collateralized Loan Obligations (CLOs).

  3. Risk Analysis: Master the evaluation of prepayment, credit, and interest rate risks inherent in MBS and ABS.

  4. Advanced Valuation Techniques: Explore pricing strategies using static and stochastic models, Monte Carlo simulations, and Option-Adjusted Spreads (OAS).

  5. 2008 Financial Crisis Insights: Analyze the role of securitization in the crisis, lessons learned, and post-crisis regulatory changes.

Detailed Outline:

1. Introduction to MBS, ABS, and Securitization

  • Overview of securitized products.

  • Historical context and market significance.

2. Mechanics of Securitization

  • Asset pooling and Special Purpose Vehicles (SPVs).

  • Tranching, credit enhancements, and the role of key entities like Fannie Mae and Ginnie Mae.

3. Mortgage-Backed Securities (MBS)

  • Types: Pass-Through MBS, CMOs, and To-Be-Announced (TBA) contracts.

  • Valuation and servicing dynamics.

4. Asset-Backed Securities (ABS)

  • Structures and underlying asset classes, from credit card receivables to auto loans.

5. Risk Analysis in MBS and ABS

  • Prepayment risk: modeling borrower behavior and its impact on cash flows.

  • Interest rate sensitivity and convexity.

  • Credit risk: assessing default probabilities and severity.

6. Advanced Prepayment and Cashflow Modeling

  • Prepayment measures such as CPR, SMM and PSA.

  • Behavioral and econometric models and their key drivers and features.

  • Current Coupon Rate which is not quoted in the market but must be derived based on SOFR swap rates.

  • Application of tools like Intex for cash flow analysis.

7. Pricing and Analytics

  • Static vs. stochastic pricing methods.

  • Option Adjusted Spread (OAS) to compensate for unhedged risks.

  • Monte Carlo standard errors and convergence.

  • Convexity measure and in particular how negative convexity impacts portfolio returns and risk management.

8. The 2008 Financial Crisis

  • Examining the systemic risks and market failures caused by securitization.

  • Regulatory changes and their impact on securitization practices.

9. Conclusion and Applications

  • Recap of critical concepts.

  • Discussion of modern trends and technological advancements in MBS/ABS trading.

Course Delivery:

This program integrates theoretical insights with practical methodologies, emphasizing the development of analytical skills and technical proficiency. Participants will hear about advanced modeling techniques, computational tools, and dynamic simulations to explore the intricacies of MBS and ABS. A Python programs is included for MBS pass-through cashflow calculations to deepen understanding of cashflow generations and prepayment speeds.

Whether you are a trader or risk manager aiming to enhance your analytical toolkit, an executive seeking to grasp structured finance's complexities, or a student aspiring to enter the field, this course equips you with the expertise and resources to excel in a competitive financial landscape.

Who this course is for:

  • This course is ideal for students, business analysts, and IT professionals looking to understand the financial and business aspects of Mortgage-Backed Securities (MBS) and Asset-Backed Securities (ABS). It provides foundational knowledge for those aspiring to careers in finance, focusing on securitization, risk management, and structured products. Junior traders and risk managers will also benefit from practical insights into prepayment risks, credit modeling, and pricing techniques. The course bridges academic concepts with real-world applications, offering a comprehensive overview of how MBS and ABS shape capital markets. It’s perfect for anyone seeking to deepen their understanding of structured finance and capital markets.

Report abuse