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    Securitisation Swaps
    A Practitioner´s Handbook
    Mark Aarons | Vlad Ender | Andrew Wilkinson

Securitisation Swaps

Available in hardcover and eBook

Develop the skillset essential to successful securitisation swaps management.

Securitisation Swaps provides an invaluable guide into this unique and complex class of derivatives for quants, structurers, traders, originators, issuers and lawyers to:

  • Manage securitisation swaps more effectively, from pre-trade structuring and modelling to post-trade risk management and accounting
  • Understand the elements of securitisation and covered bonds, and how swaps mitigate risk in these types of transactions
  • Explore how securitisation swaps differ from other derivatives and delve into their three specific risk factors — swap prepayment risk, swap extension risk and downgrade risk
  • Learn practical methods and strategies of risk management, accounting, pricing and transaction execution


Securitisation Swaps provides an extensive toolkit of structuring techniques to mitigate non-vanilla swap risks, such as swap prepayment risk, swap extension risk and downgrade risk. Understanding and mastering these techniques will allow both buy side and sell side participants to optimise the pricing and risk characteristics of their structured funding trades.

We cover these risks in detail with comprehensive sections on risk mitigation techniques. The risk mitigation mechanisms, their modelling and legal aspects and their advantages and disadvantages are discussed in depth.

Modelling and pricing

We show how to model securitisation swaps from the ground up, starting with the underlying loan pool dynamics. The impact of cash flow waterfalls and tranching is covered in detail, including two important conservation laws which explain how the properties of different tranches in the same structure impact one another. Prepayment risk, swap extension risk and downgrade risk including Monte Carlo modelling and the intuitive aspects underlying the models are comprehensively covered. Practitioners will be fully equipped to build and validate their own models, compute prices for each risk component and calculate critical risk metrics.

For readers without a background in swaps or derivatives, we also cover the foundations of vanilla interest rate and cross-currency swaps.

Legal aspects

Securitisations and covered bonds involve complex legal documentation and numerous parties. Securitisation swaps explains the overall legal documentary framework, the rights, obligations and inter-relationships of each party and how to navigate through the documentation. We delve into the specific legal details relevant to asset and liability swaps. Topical and practical legal and regulatory aspects are also covered including: legal opinions, flip clauses, DPCs and the document execution process which is particularly complicated for securitisation swaps. The legal aspects of the various risk mitigation techniques are also covered in detail.

Trade management

Securitisation swaps covers the three stages of deal management in detail, namely the pre-trade, deal close and post-trade phases. Putting a securitisation swap deal together involves numerous moving parts and interacting with numerous participants. At deal close, all of these aspects come together in a short, sometimes frenetic, timeframe. We provide invaluable practical, tested in real world, advice for navigating these stages, including a comprehensive deal checklist and how the overall swap pricing is put together. Accounting, risk management and risk framework aspects are also covered in detail, both for individual trades and for the discipline of managing the back-book portfolio of accumulated trades.

About the authors

Mark Aarons

Mark Aarons

Melbourne, Australia

Head of FICC Structuring at the National Australia Bank from 2010 to 2017, where he built a leading securitisation swap business in both Australia and the UK. Mark is currently Head of Investment Risk at a leading Australian funds manager and is also an Adjunct Associate Professor in the Centre for Quantitative Finance and Investment Strategies at Monash University. He has degrees in Law and Science from Monash University and a PhD in Mathematics jointly from the Max Planck Institute for Gravitational Physics and the Free University of Berlin, Germany.

Vlad Ender

Vlad Ender

London, UK

Director at Kauri Solutions, a financial markets consulting practice. Prior to founding Kauri Solutions in 2015, Vlad spent eight years at National Australia Bank's London office. He served as an Executive Director in the FICC Structuring team, providing bespoke derivatives to NAB's clients, including innovative solutions for asset and liability swaps to support RMBS and covered bond issuance by some of the largest UK issuers. Before joining NAB, Vlad was a partner at a New Zealand IT consultancy delivering tailored solutions to the financial sector.

Andrew Wilkinson

Andrew Wilkinson

Melbourne, Australia

Senior legal counsel at a leading Australian bank where he specialises in bespoke derivatives and securitisation. Previously, Andrew spent a decade in London working through the financial crisis and beyond for leading law firms Linklaters LLP and Weil, Gotshal & Manges. Through this period Andrew worked on some the most complex and innovative transactions in the market, providing advice to securitisation and covered bond issuers and arrangers across UK, Europe and Asia. He has degrees in Arts and Law from Monash University and a Masters of Banking and Financial Services Law from the University of Melbourne.

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