Structured products make up part of the $24T fixed income markets. Structured products are synthetic investment instruments specially created to meet the needs that cannot be met from the cash financial instruments available in the markets. Structured products can be used: as an alternative to a direct investment; as part of the asset allocation process to reduce risk exposure of a portfolio; or to utilize the current market trend. The FDIC says Structured finance transactions encompass a broad array of products with varying levels of complexity. Structured products typically result in a final product that is often nonstandard and is structured to meet the specific financial objectives of a customer.
Second, they often involve professionals from multiple disciplines within the financial institution and may have significant fees or high returns in relation to the market and credit risks associated with the transaction. Third, they may be associated with the creation or use of one or more special purpose entities (SPEs) designed to address the economic, legal, tax or accounting objectives of the customer and/or the combination of cash and derivative products. Finally, and perhaps most important, they may expose the financial institution to elevated levels of market, credit, operational, legal or reputation risks. Come and join us for insights into this exciting and growing area of finance.
This introductory course guides students through the evolution of asset securitization, which results in new products for investors and expanded sources of funding and risk transfer opportunities for issuers. It shows how an asset-backed security is constructed, rated by the credit agencies, traded, and valued. The course also explores the different ABS market segments, from the large, established segments like automobile loans, to emerging and sub-prime market segments. The course concludes with a look at current trends in the industry. Learn more!