Reverse Engineering Deals on Wall Street with Microsoft Excel

A serious source of information for those looking to reverse engineer business deals It s clear from the current turbulence on Wall Street that the inner workings of its most complex transactions are poorly understood. Wall Street deals parse risk using intricate legal terminology that is difficult to translate into an analytical model. Reverse Engineering Deals on Wall Street: A Step-By-Step Guide takes readers through a detailed methodology of deconstructing the public deal documentation of a modern Wall Street transaction and applying the deconstructed elements to create a fully dynamic model that can be used for risk and investment analysis. Appropriate for the current market climate, an actual residential mortgage backed security (RMBS) transaction is taken from prospectus to model by the end of the book. Step by step, Allman walks the reader through the reversing process with textual excerpts from the prospectus and discussions on how it directly transfers to a model. Each chapter begins with a discussion of concepts with exact references to an example prospectus, followed by a section called "e;Model Builder,"e; in which Allman translates the theory into a fully functioning model for the example deal. Also included is valuable VBA code and detailed explanation that shows proper valuation methods including loan level amortization and full trigger modeling. Aside from investment analysis this text can help anyone who wants to keep track of the competition, learn from others public transactions, or set up a system to audit one s own models. Note: CD-ROM/DVD and other supplementary materials are not included as part of eBook file.

A serious source of information for those looking to reverseengineer business dealsIt's clear from the current turbulence on Wall Street thatthe inner workings of its most complex transactions are poorlyunderstood. Wall Street deals parse risk using intricate legalterminology that is difficult to translate into an analyticalmodel. Reverse Engineering Deals on Wall Street: A Step-By-StepGuide takes readers through a detailed methodology ofdeconstructing the public deal documentation of a modern WallStreet transaction and applying the deconstructed elements tocreate a fully dynamic model that can be used for risk andinvestment analysis.Appropriate for the current market climate, an actualresidential mortgage backed security (RMBS) transaction is takenfrom prospectus to model by the end of the book. Step by stepAllman walks the reader through the reversing process with textualexcerpts from the prospectus and discussions on how it directlytransfers to a model. Each chapter begins with a discussion ofconcepts with exact references to an example prospectus, followedby a section called "Model Builder," in which Allman translates thetheory into a fully functioning model for the example deal. Alsoincluded is valuable VBA code and detailed explanation that showsproper valuation methods including loan level amortization and fulltrigger modeling.Aside from investment analysis this text can help anyone whowants to keep track of the competition, learn from others publictransactions, or set up a system to audit one's ownmodels.Note: CD-ROM/DVD and other supplementary materials arenot included as part of eBook file.

Preface.Acknowledgments.About the Author.CHAPTER 1: Introduction.The Transaction.The Documents.The Process.How This Book Works.CHAPTER 2: Determining Dates and Setting Up Timing.Differences in Timing Approaches.A First Look at the Prospectus.Important Dates.Transforming Dates and Timing from Words to a Model.Model Builder 2.1: Reversing Dates and Timing.Conclusion of Dates and Timing.CHAPTER 3: Creating Asset Cash Flow from ProspectusData.It's All in the Prospectus Supplement.The Basics of Amortization.Performance and the Prospectus Supplement.Delinquency.Loss.Prepayment.Recovery.Creating Cash Flow.A Complex Implementation.Model Builder 3.1: Entering in the Raw Asset Information.Model Builder 3.2: Entering in the Default and PrepaymentAssumptions.Model Builder 3.3: Interest Rates and Additional AssetAmortization Inputs.Model Builder 3.4: Introducing VBA and Moving Data In and Out ofthe Model.Model Builder 3.5: Loading Loan Performance Assumptions intoVBA.Model Builder 3.6: Global Functions.Model Builder 3.7: Loan-Level Asset Amortization.CHAPTER 4: Setting Up Liability Assumptions, Paying Fees, andDistributing Interest.Identifying the Offered Securities.Model Builder 4.1: Transferring the Liability Information to aConsolidated Sheet.The Liability Waterfall: A System of Priority.Model Builder 4.2: Starting the Waterfall with Fees.Interest: No Financing Is Free.Model Builder 4.3: Continuing the Waterfall with Interest Paidto the Certificate Holders.More on Waterfalls and Wall Street's Risk Parsing.Model Builder 4.4: Mezzanine Interest.Continuing the Waterfall: It Only Gets More Complicated.CHAPTER 5: Principal Repayment and the Shifting Nature of aWall Street Deal.Model Builder 5.1: The Deal State and Senior Principal.Mezzanine Principal Returns.Model Builder 5.2: The Mezzanine Certificates' Priority ofPayments.Number Games or Risk Parsing?CHAPTER 6: Credit Enhancement Mechanisms to MitigateLoss.Model Builder 6.1: Excess Spread, Overcollateralization, andCredit Enhancement.CHAPTER 7: Auditing the Model.Model Builder 7.1.CHAPTER 8: Conclusion of Example Transaction and FinalThoughts on Reverse Engineering.Mortgage Insurance and Servicer Advances.Reverse Engineering in the Current and Future Market.Appendix.Automatic Range Naming.About the CD-ROM.Index.