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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.

Find out how ABSTRAK was able to detect the subprime crisis here.

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 Workflow

ABSTRAK Workflow

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 (up to 21 metrics including Fair Market Value, Credit Duration, CDS Spread, Forecast…) 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©

Fair Market Value Comparison

Fair Market Value Comparison

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.

CDS Spread Comparison

CDS Spread Comparison