ABSTRAK®

R&R Consulting developed the ABSTRAK® to reflect natural transitions of credit quality in structured securities as they occur.

Continuously tested since 2001, ABSTRAK® has an unrivalled track record as a fast, consistent, accurate signal of relative value with strong anti-fraud capabilities. ABSTRAK® works by pulling current servicer data into the rating engine and measuring the changing profile of risk in a Bayesian framework. Delinquency modeling creates a two-year early warning signal on performance that enables ABSTRAK® users to forecast security improvement or deterioration far in advance of the rest of the market. Use of the Waterfall Editor™ inside ABSTRAK enables users without a programming background to faithfully reproduce deals already in the market or flexibly create new ones.

Without a tool like ABSTRAK®, the quest for fair value in ABS, RMBS, CMBS, CDO as well as some CLN and CDS, remains elusive.

Here is how the ABSTRAK® works:

Once the fundamental deal parameters and monthly servicing data are initialized, the ABSTRAK® modeling engine carries out Monte Carlo simulation-based analysis to generate a key series of graphs and statistics that help the investor and analyst understand security value in current and future terms.

ABSTRAK® modeling has two distinct phases: calibration and monitoring.

* The goal of Calibration, to calculate the short-rate volatility of expected collateral losses such that the senior tranche experiences an average reduction of yield consistent with the issued rating, usually Aaa.

• The engine reads in the deal parameters as entered into the engine by the analyst, who draws that information from the deal’s prospectus.
• It then combines Monte Carlo simulations with non-linear optimization to ascertain the volatility required to generate the losses indicated by the deal’s rating.
• This value is stored for use in monthly monitoring.

* Monitoring takes ongoing monthly servicing data (delinquencies, losses, prepayments, recoveries) and values computed from Calibration to simulate liability cash flows and produce probability-weighted averages.

• Each month the monitoring process is executed with the latest monthly data and new results are calculated.
• Trends in reduction of yield and fair market value are easily identified via ABSTRAK®’s descriptive graphical interface.

ABSTRAK® is fully integrated with the infinitely flexible, user-friendly Waterfall Editor©

For portfolio managers who want to manage their aggregated ABS exposures dynamically, FUNDTRAK™ is a comprehensive re-rating tool that computes security value using ABSTRAK® inputs.