- Securitization Cashflow Setup
- Creating Cohorts
- Cohort Summary Visualization
- Copying & Scaling Scenarios, and Creating Scenarios using OM Replines
- Cashflow Results & Modifying Valuations
- Ordering Tranche Table Output
- Matrix Analysis
Note: These instructions are specific to using the cashflow functionality within our app, but we are also able to provide direct access to the cashflow engine via an API. Please contact us for more information.
Securitization Cashflow Setup
The ability to run Securitization cashflows is a core component of the dv01 app and can be launched by clicking the "Cashflows" tab within Securitizations. Whole loan cashflows can be accessed via Market Surveillance or Portfolio Management.
See also: Whole Loan Cashflows
As with our whole loan cashflow capability, the scenario setup screen lets you specify up to six scenarios. Each scenario allows you to specify Prepay, Default, and DQ/mo curves, as well as a Severity percentage and Lag. Note that the Prepay, Delinquency, and Default inputs accept curves specified in our Curve Notation for specifying time-varying values. You also have the option to name and save each scenario for later re-use.
Additionally, you can specify an alternate set of assumptions (Prepay, DQ/mo, Default, Severity, and Lag) for cohorts of loans, selected on the basis of the loans' current delinquency status. You can add as many cohorts of loans as you like (we recommend using the 'Tab' key to jump between input fields as you enter the required values).
Detailed below are two methods by which you can create cohorts of loans. Additionally, you can cohort collateral and whole loan pools by any loan attribute; input different prepay, loss, and default curves; and specify a lag and severity level for each cohort.
Method One: Auto-Cohorting
You can use our Auto-Cohorting functionality to automatically generate cohorts based on one metric (e.g. FICO, DTI). Simply click on the "Cohort by" dropdown and select which metric you'd like to use.
Once you select a metric, all loans will be cohorted into all applicable buckets and activated. You will be able to input assumptions for each active cohort (to deactivate a cohort, simply click the corresponding checkbox). If no inputs are defined for an active cohort, the loans in that cohort are run assuming a zero:zero scenario. If a cohort is "inactive" then all the loans that are contained in it are treated as if they were part of the base pool and cashflows are run using the curves input in the base scenario.
Method Two: Custom Cohorting
You can define a "custom cohort" using advanced filtering options.
Hierarchically, custom cohorts come first. If a loan falls into the parameters defined by a custom cohort, then it cannot also be a part of a cohort that is lower down in the hierarchy. However, the base cohort, which remains fixed as the top row on the cashflow curve input table, is hierarchically at the bottom of all other rules and contains all loans that do not fit into any of the defined cohorts. Note that you can also copy the base scenario and scale curves.
Cohort Summary Visualization
The scenario set-up contains a visualization that allows you to see the number of active cohorts. The Base Pool is always gray in color, and if no cohorts have been added, the whole bar remains gray.
As cohorts are added and activated, they will be shown in order in the cohort summary bar. The size of each slice directly correlates to the size of C Bal for that cohort.
Copying & Scaling Scenarios, and Creating Scenarios using OM Replines
You can run a scenario to first call or use OM replines to run a scenario using the options below. Note that when using OM replines, any previously defined Prepay, Delinquency, or Default curves will no longer be applicable.
Once your inputs are complete, click “Run Cashflow".
Cashflow Results & Modifying Valuations
The cashflow results are returned below the inputs section, complete with a paydown chart for every tranche and cumulative prepay and cumulative net loss curves. The paydown chart displays the historical values in the shaded area to the left of the white dotted line, which represents the current period and separates historical values from the un-shaded projected values on the right.
As shown below, our cashflow engine provides instant re-pricing of cashflow valuations right on the output screen; there is no need to re-run the simulation just to change the yield or spread assumptions. By default, the system computes valuation parameters corresponding to a price of 100 for the notes; you can enter an alternate value for any of the valuation fields (called the "dominant value" and shown in green text) and the other values will be automatically recalculated accordingly.
To modify the cashflow assumptions and re-run the scenarios, scroll back up to the cashflow scenario set-up, make changes, and click "Run Cashflow" again.
You can also download a comprehensive internal waterfall cashflow report to Excel by clicking the 'Download Detailed Cashflows' link in the Tranche & Collateral Cashflows card, shown below.
Ordering Tranche Table Output
By choosing to strat by "Scenario", you can change the tranche table output to sort in a scenario-first ordering, so that the full tranche table appears together under each scenario.
This section displays a selected valuation parameter by a specified step percentage four steps in either direction of the provided center valuation; by default, we step Yield by +/- 200 bps on the first scenario. You can change the scenario, the valuation parameter, and the step size using the controls highlighted below. You can also change the valuation parameters directly in the input boxes below the selected scenario; note that these valuation parameter values are directly connected to the valuation parameters in the Tranche table at the top of the output screen.