Abstract
In this chapter we discuss the analysis of asset-backed securities (ABS) in the environment of competitive risk-based pricing in the banking industry. We will cover the relevant aspects that need to be considered before investing in an ABS structure. When it comes to model-based pricing approaches a portfolio model is needed. The practitioner may either choose a simulation-based approach or an analytical model, where both have their advantages and shortcomings. We will focus on the usage of CreditRisk+ in the context of ABS pricing, outline the prerequisites for running the model in practice and finally discuss the pricing of a simple ABS structure with CreditRisk+.
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