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Distressed Asset Valuation |
Distressed Asset Valuation |
In the current market environment, investing in distressed assets has emerged as a new opportunity. Government agencies and private institutions are looking to buy bad loans and securities and recover the maximum possible to attain a profitable return. In the midst of this huge opportunity, valuation of those distressed loans has evolved as the key to success. With our extensive experience and understanding of domain and complex securities, Byte can help you in the valuation of distressed loans. We help our clients assess the fair value of assets backing the complex securities to enable them to realize sound returns on their investments.
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Now consider this |
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Delinquencies are on the rise everyday.
Collateral performance has emerged as a key issue. -
Investing in distressed assets is extremely sensitive to
expected losses and recovery. |
What we do and how we do it: |
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Intensive loan level collateral modeling which includes
detailed collateral analysis based on zip codes and other
loan attributes of the properties. |
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Run simulations for expected losses incurred by the
collateral.
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Simulations
will be based on data obtained from detailed loan level
collateral analysis as well as comparisons against
historical data to project future trends.
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Byte
analyzes the collateral to create current and future
expected prepayment rates, delinquencies, losses and
recoveries.
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These “vectors” are then used in Byte’s propriety bond
models to determine how the collateral losses will be
distributed through the bond waterfall and their impact on
each tranche in the deal. From these results Byte calculates
the expected current price and yield for each bond. |
| The key to the valuation of these distressed assets is a detailed predictive analysis of the defaults and recoveries. Our service suite
“Collateral Analysis” helps us determine the underlying strength of the collateral in the security and the fair valuation thereof.
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Byte uses a systematic and transparent approach to developing our valuation models. Though the models are proprietary, we discuss our approach with clients, to provide transparency on all formulas used, inputs, and documentation that will be used in the valuation of the portfolio of securities. There are no “black boxes” with hidden formulas. Users can easily adjust our valuation models to suit their needs, and run additional scenarios as they see fit based on additional assumptions that they want to run on the underlying data. We will use generally excepted data curves and copulas to project future data inputs that will be used in each individual model. The projected data inputs such as prepayment speeds, defaults, delinquencies, recoveries, etc will then be compared against current and historical data to ensure all projections make logical sense.
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Collateral Analysis |
In the current market scenario, it is becoming increasingly important for an issuer as well as an investment manager to know how the collateral is performing. Byte Consulting provides you with a comprehensive collateral analysis service for CDOs, RMBS, Credit Card deals, and Student Loans, sorted by any type of loan attribute, such as zip-codes in RMBS deals. This involves foreclosure analysis in a particular zip-code (or any loan attribute), correlation analysis of foreclosures on the properties involved in a particular portfolio with properties in a particular region as well as delinquencies and prepayments trend analysis.
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