Conducting Structured Finance Surveillance

When To Use

• Periodic (monthly/quarterly) monitoring of ABS, MBS, CLO, or CDO performance against origination assumptions
• Evaluating whether collateral pool deterioration is approaching or breaching indenture triggers
• Tracking overcollateralization (OC) and interest coverage (IC) test compliance across tranches
• Assessing credit migration within a collateral pool (upgrades, downgrades, defaults, recovery rates)
• Preparing surveillance summaries for portfolio managers, rating agencies, or risk committees
• Responding to market stress events that may accelerate structured product deterioration

Inputs To Gather

• Trustee reports — most recent and prior periods for trend analysis (remittance reports, monthly servicer reports)
• Deal documents — indenture/pooling and servicing agreement (PSA) with trigger definitions, waterfall priority, and event-of-default thresholds
• Collateral tape — loan-level or asset-level data with current balances, delinquency status, credit ratings, and loss severity
• Coverage test levels — current OC and IC ratios versus trigger thresholds for each tranche
• Rating agency actions — recent rating changes on underlying collateral or tranche ratings
• Market data — relevant index spreads (e.g., CLOIE, ABX), discount margins, and comparable deal pricing
• Historical performance data — vintage curves for delinquency, default, prepayment (CPR/CDR/severity)