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The Budapest Securitized Products Structuring team is involved in analytical processes regarding several fixed income products with special focus on Asset-Backed Securities (ABS) and Mortgage-Backed Securities (MBS). Structurers build computational models to help issuers and investors optimize a transaction’s economics and quantify sources of value and risk. In that sense, the team has exposure to both the primary and the secondary markets of these products.
As a core function, the team builds cash flow models to support the firm’s advisory role in providing financing solutions for clients. Among others, this involves creating capital structures that can survive extreme rating agency scenarios while providing the cheapest source of funding for our clients.
Building on our cash flow modeling expertise, we also support the secondary trading functions of our firm in the ABS and MBS space. Reverse-engineering means understanding existing deals based on legal documents and investor reports and creating a pricing model based on available information. Our models help identify the risk and reward characteristics of these products given our traders’ expectations on the market.
The team works both on short- and long-term projects depending on the asset class, strategy, and project status. In big picture, we set up action groups to deliver a given project. Currently, we have four of these action groups focusing on:
- Primary and Secondary Markets of US Student Loans,
- Secondary Markets of Aircraft products,
- Primary and Secondary Markets of a wide range of European MBS&ABS products, and
- Primary Markets of US Agency Collateralized Mortgage Obligations (CMO).
In the Student Loan and Aircraft space, the team reverse-engineers existing bonds by building cash flow models to support secondary ABS trading globally, structure new money deals and work on restructuring opportunities to resolve the less liquid markets and help investors to get access to cheaper funding.
Covering the European structured finance market, the team works with the London Primary and Secondary desks, mostly on European Residential MBS structures, looking for restructuring opportunities, as well as more esoteric products such as UK pub securitizations.
In the agency residential mortgage space, the team supports Agency CMO traders by modeling cash flows of CMO structures enabling investors and traders to evaluate the risk/reward characteristics of the bonds, and by providing market summaries about monthly issuances of agency CMOs. Team members also lead the firm’s monthly CMO issuance by interacting with the agencies (Ginnie Mae, Fannie Mae, Freddie Mac), accountants, attorneys and trustees where the firm acts as the sponsor of the deal.
We collaborate with our counterparties on a daily basis including the New York Structuring desk, the London Primary and Secondary desk, the New York Agency CMO trading desk, as well as the New York and London banking side within the firm. We also contact outside parties such as rating agencies, GSEs, trustees and others involved in our primary or secondary activities.
In the midst of the recent financial crisis, the team also provided credit risk analysis on residential collateral pools backing to-be-issued MBSs including agency, non-agency and subprime products, and also monitored underlying assets of CDOs for the proprietary trading desk in London. These projects enabled the team to see the financial turmoil from the front seats and empowered with life-long experiences.
The team consists of people who joined the firm upon the formation of the team in September of 2006 as well as members who joined gradually from then on. Thus, our experience in the ABS and MBS space adds up to 20+ years. Members are typically from top tier universities including schools in Hungary, Germany, France, the Netherlands, Denmark, England and the United States with financial background and focused on analytical and quantitative skills.
If you are further interested in our activities please do not hesitate to contact budapest.recruitment@morganstanley.com or marton.erdei@morganstanley.com
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