There are many ways to slice a securitization but only one way to rate it: continuously.
Traditional ratings cover only a limited risk spectrum when the security goes to market. The risk measurement stops after origination.
R&R ratings reflect the evolving credit risk of tranches as new data become available. The computations are based on the data disclosures required by the U.S. Securities & Exchange Commission in Regulation AB1. They are updated every payment period to provide a full picture of security risk and value through time.
Dynamic re-rating is good for the market. Investors benefit from an early warning signal on mispriced and underperforming transactions. Sellers whose assets meet the public performance criteria benefit from upgrade eligibility.
By reducing capital waste, R&R ratings promote capital renewability.
ABSTRAK® is CreditSpectrum’s patented flagship product, a data-driven monitoring engine that fully reflects the current risk and value of ABS tranches.
The ABSTRAK® automatically uploads and crunches monthly servicer report data to reflect the changing impact of borrower optionality and remaining credit enhancement on ABS performance.
Outputs are fully based on data disclosures required by the U.S. Securities & Exchange Commission in Regulation AB1. They are updated every payment period to provide a full picture of security risk and value through time.
More than 20 key credit-sensitivity parameters are produced monthly for each tranche including intrinsic cash flow value, CDS spreads, credit duration, credit convexity and the asymptotic pool Expected Loss. CreditSpectrum ratings reflect the evolving credit risk of tranches as new data become available.
By following the time value of risk in ABS tranches, CreditSpectrum ratings promote capital renewability.
CreditSpectrum metrics enable the user to fully reflect the time value of risk in ABS tranches by using all the data available, beginning at origination.
The WATERFALL EDITOR© [WFE©] is CreditSpectrum’s primary market structuring and valuation Java-enabled model that uses standard XML language.
Key advantages of using WFE© are visual feedback, flexibility, cloning, ease of debugging, and a perfect data dictionary that prevents semantic confusion. A common example of semantic confusion in waterfall modeling is the failure to subordinate cash flows based on the priority of claims in a pro rata transaction.
WFE© comes with a transaction wizard and a large library of existing structures that can be readily adapted to build new features. Examples include multiple pools used in U.S. RMBS, nested payment structures used in auto ABS and default traps used in the Japan RMBS market.
To capture the evolving credit risk of asset-backed securities, CreditSpectrum builds scoring systems that narrow the range of unexpected loan performance at origination.
The same scoring system can be used to re-price assets retained on the balance sheet or as a pricing benchmark in third party sales.
Credit scores enhance risk precision. By substituting information for capital-at-risk, CreditSpectrum credit metrics promote capital renewability.