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IESEG School of Management ( IÉSEG )

Code Cours :



Niveau Année de formation Période Langue d'enseignement 
Professeur(s) responsable(s)P.DAGUET

Pré requis

Finance master students

Objectifs du cours

Have a thorough knowledge of securitization techniques
have a practice of managing a pool of credit sensitive assets
identify risks and manage it adequately
React adequately in front of specific risks and situations

Contenu du cours

1st part (online time): Securitization and CDO Seminar (videos)
_ Securitization overview
_ Cash securitizations models: a primer
_ Synthetics and hybrids securitizations
_ The Arbitrage CDO Game : Warm up

2nd part (online time): Portfolio management
Origination Phase (this phase is largely automated, the manager selects the collateral he acquires).
Participants are briefed on the investment management mandate they will follow.
1. Source a portfolio of bonds and loans in the market (HYB et Leveraged Loans): this step is fulfilled by the manager who selects the assets that suit its mandate best. Collateral is fictitious and created out of a list of bonds and loans. Size of the portfolio and weights will be determined in the mandate guidelines.
2. Proceed to collateral analysis and rating: this would be done in assigning to the overall collateral a rating thanks to a rating methodology module provided to the manager.
3. Tranching and structuring : the portfolio will be tranched and the risks redistributed in various slices. These slices will form a series of liabilities sold to investors. Average life, WARF etc… are calculated. Again here the manager and assistant propose a tranching. Advisor review the tranching and sign off on it.
4. Marketing and selling the tranches : Investors decide to analyse the structure and accept to get on board with it. Discussion, negotiations, and convincing arguments are necessary to board the investors in.
5. Costing & profitability: an SPV is setup and fees are taken. The manager determines a typical P&L for the arbitrage CDO. This is his business model and rationale to enter into the deal.

Management Phase (most active phase for the manager and his assistant)
This phase involves several unexpected shocks that will hurt the portfolio. The manager will take appropriate actions to counter these shocks.
1. The manager manages the portfolio: buy/sell, always in compliance with the guidelines set at start. Trades are done in consideration to yield to maturity, credit rating, migration, interest rates environment.
2. Hedging and rebalancing : The manager can enter credit derivative contracts or interest rate derivatives to match liabilities with assets. This is done through quotes obtained from the trading platform.
3. Daily Cash management : The manager makes sure investors are paid what they should receive on time. His/her assistant manages cash in/cash out flows.

Wind Down Phase (also very active but rather for the assistant)
This phase involves selling and winding the portfolio down and giving the money back to investors. It is also the time to draw the line on the management of the portfolio and its performance.
1. The manager sells assets and proceeds are distributed to investors according to the waterfall module.
2. The manager unwinds derivatives in which he was party. The CDS /Swap module computes mark to market value of the swap and gives the result to the manager.
3. Finally the manager draws the line of its mandate: was it profitable or not to the investors? To him? He makes an overall presentation of his management to the board of investors.

Modalités d'enseignement

Organisation du cours

TypeNombre d'heuresRemarques
Independent work
Independent study
Group Project20,00  
Estimated personal workload10,00  
Charge de travail globale de l'étudiant50,00  

Méthodes pédagogiques

  • Presentation
  • E-learning
  • Case study


4 M.C.Qs during the 1st part of the course
An initial pitch before the portfolio management phase and a final reporting after the selling of the portfolio
3 video synthesis
3 shocks to solve: the students will have to face events during the management phase and they will have to solve them quickly (within 48 hours).

Type de ContrôleDuréeNombrePondération
Continuous assessment
Oral presentation0,00235,00
Group Project0,00330,00
Written Report0,00315,00
TOTAL     100,00

* Informations non contractuelles et pouvant être soumises à modification
Vidéo : Un campus à vivre
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