How credit market conditions expose challenges of securitization technology systems
June 2008
At a glance
Due to the ongoing liquidity crunch and a lack of a secondary market activity for many types of securitized instruments, organizations must now rely more heavily on financial models to support valuation prices. These valuation models are driven by assumptions around the performance of the underlying asset level collateral. Inaccurate or incomplete collateral data can have a significant impact on the valuation results and attendant reporting and compliance.
Due to the ongoing liquidity crunch and a lack of a secondary market activity for many types of securitized instruments, organizations must now rely more heavily on financial models to support valuation prices. These valuation models are driven by assumptions around the performance of the underlying asset level collateral. Inaccurate or incomplete collateral data can have a significant impact on the valuation results and attendant reporting and compliance.
Going forward, investors and ratings agencies will expect issuers to provide more detailed underlying collateral data than has been provided in the past that can be analyzed objectively. Those issuers whose systems can provide granular data which can be analyzed objectively will garner the confidence of investors and rating agencies.