Structured Credit Risk (FRM Part 2 2023 - Book 2 - Chapter 8)

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After completing this reading you should be able to:
- Describe common types of structured products.
- Describe tranching and the distribution of credit losses in a securitization.
- Describe a waterfall structure in a securitization.
- Identify the key participants in the securitization process and describe conflicts of interest that can arise in the process.
- Compute and evaluate one or two iterations of interim cashflows in a three-tiered securitization structure.
- Describe a simulation approach to calculating credit losses for different tranches in a securitization.
- Explain how the default probabilities and default correlations affect the credit risk in a securitization.
- Explain how default sensitivities for tranches are measured.
- Describe risk factors that impact structured products.
- Define implied correlation and describe how it can be measured.
- Identify the motivations for using structured credit products.

[@rupendragoswami5341]

Thanks a ton for these videos. I cant thank you enough for explaining these difficult concepts in such simple language. You are doing great work!!

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[@jehanzaib19]

These are brilliant lectures for building understanding of otherwise weird sounding concepts.
Thanks Professor :)

[@analystprep]

Thank you!

[@karthikramakrishnan5295]

Thank you Professor James and AnalystPrep team for these videos .
A quick query on the default correlation, default rates and it's impact on various tranches. How does a high default rate and high correlation have a positive impact on equity but negative impact on senior tranche?

[@padmaroopakothandaraman4082]

Can we expect the video lecture for FRM part 2 - book 2 - chapter 9 on counter party risk any time soon ? I am so used to watching your videos after reading the book as it helps me to understand the concepts better. Thank you for sharing it as an open source!

[@analystprep]

Hi Padmaroopa. All videos can be found for AnalystPrep premium users at app.analystprep.com. I hope this helps!

[@gonzavig1737]

Like the new look professor. 🔝🔝

[@analystprep]

Glad you like it!

[@ditshegomosienyane7252]

Is there any reason why prepayments appear not to have been taken into account in this model?