Preface.
Acknowledgments.
About the Author.
Introduction.
The Three Basic Elements of a Cash Flow Model.
Inputs.
Cash Flow Structure.
Outputs.
The Process of Building a Cash Flow Model.
Plan and Design.
Obtain All Necessary Information.
Construct Basic Framework.
Develop Advanced Structure.
Validate Assumptions.
Test Model.
How This Book Is Designed.
CHAPTER 1. Dates and Timing.
Time Progression.
Dates and Timing on the Inputs Sheet.
Day-Count Systems: 30/360 versus Actual/360 versus Actual/365.
Model Builder 1.1: Inputs Sheet—Dates and Timing.
Dates and Timing on the Cash Flow Sheet.
Model Builder 1.2: Cash Flow Sheet—Dates and Timing.
Toolbox.
Naming Cells and Ranges.
Data Validation Lists.
EDATE.
CHAPTER 2. Asset Cash Flow Generation.
Loan Level versus Representative Line Amortization.
How Asset Generation Is Demonstrated in Model Builder.
Asset Generation on the Inputs Sheet.
Fixed Rate Amortization Inputs.
Floating Rate Amortization Inputs.
Model Builder 2.1: Inputs Sheet Asset Assumptions and the Vectors Sheet.
Asset Generation on the Cash Flow Sheet.
Model Builder 2.2: Notional Asset Amortization on the Cash Flow Sheet.
Toolbox.
OFFSET.
MATCH.
MOD.
PMT.
CHAPTER 3. Prepayments.
How Prepayments Are Tracked.
SMM: Single Monthly Mortality.
CPR: Conditional Prepayment Rate.
PSA: Public Securities Association.
ABS: Absolute Prepayment Speed.
Historical Prepayment Data Formats.
Building Prepayment Curves.
Prepayment Curves in Project Model Builder.
The Effect of Prepayments on Structured Transactions.
Model Builder 3.1: Historical Prepayment Analysis and Creating a Projected Prepayment Curve.
Model Builder 3.2: Integrating Projected Prepayments in Asset Amortization.
Toolbox.
Weighted Averages Using SUMPRODUCT and SUM.
CHAPTER 4. Delinquency, Default, and Loss Analysis.
Delinquencies versus Defaults versus Loss.
The Importance of Analyzing Delinquency.
Model Builder 4.1: Building Historical Delinquency Curves.
Deriving Historical Loss Curves.
Model Builder 4.2: Building Historical and Projected Loss Curves.
Analyzing Historical Loss Curves.
Model Builder 4.2 Continued.
Projecting Loss Curves.
Model Builder 4.2 Continued.
Integrating Loss Projections.
The Effects of Seasoning and Default Timing.
Model Builder 4.3: Integrating Defaults in Asset Amortization.
CHAPTER 5. Recoveries.
Model Builder 5.1: Historical Recovery Analysis.
Projecting Recoveries in a Cash Flow Model.
Model Builder 5.2: Integrating Recoveries into Project Model Builder.
Final Points Regarding Recoveries.
CHAPTER 6. Liabilities and the Cash Flow Waterfall.
Priority of Payments and the Cash Flow Waterfall.
The Movement of Cash for an Individual Liability.
Types of Liabilities.
Fees.
Model Builder 6.1: Calculating Fees in the Waterfall.
Interest.
Model Builder 6.2: Calculating Interest in the Waterfall.
Principal.
Model Builder 6.3: Calculating Principal in the Waterfall.
Understanding Basic Asset and Liability Interactions.
CHAPTER 7. Advanced Liability Structures: Triggers, Interest Rate Swaps, and Reserve Accounts.
Triggers and Their Affect on the Liability Structure.
Model Builder 7.1: Incorporating Triggers.
Swaps.
Model Builder 7.2: Incorporating a Basic Interest Rate Swap.
Final Notes on Swaps.
Reserve Accounts.
Model Builder 7.3: Incorporating a Cash-Funded Reserve Account.
Conclusion of the Cash Flow Waterfall.
Toolbox.
AND and OR.
CHAPTER 8. Analytics and Output Reporting.
Internal Testing.
Cash In versus Cash Out.
Model Builder 8.1: Cash In versus Cash Out Test.
Balances at Maturity.
Model Builder 8.2: Balances at Maturity Tests.
Asset Principal Check.
Model Builder 8.3: Asset Principal Check Test.
Performance Analytics.
Monthly Yield.
Model Builder 8.4: Calculating Monthly Yield.
Calculating the Monthly Yield.
Bond-Equivalent Yield.
Model Builder 8.5: Calculating Bond-Equivalent Yield.
Modified Duration.
Model Builder 8.6: Calculating Modified Duration.
Output Reporting.
Model Builder 8.7: Creating the Output Report.
The Importance of Testing and Output.
Toolbox.
Conditional Formatting.
Goal Seek.
Array Formulas.
CHAPTER 9. Understanding the Model.
The Complete Model in Review.
Understanding the Effects of Increased Loss.
Varying Principal Allocation Methodologies.
Varying Prepayment Rates.
Varying Loss Timing.
Varying Recovery Rate and Lag.
The Value of a Swap.
Additional Testing.
CHAPTER 10. Automation Using Visual Basic Applications (VBA).
Conventions of This Chapter.
The Visual Basic Editor.
The Menu Bar.
The Project Explorer and the Properties Window.
VBA Code.
Simple Automation for Printing and Goal Seek.
Model Builder 10.1: Automating Print Procedures.
Model Builder 10.2: Automating Goal Seek to Optimize Advance Rates.
Understanding Looping to Automate the Analytics Sheet.
Model Builder 10.3: Automating Goal Seek to Perform Transaction Analytics.
Automated Scenario Generation.
Model Builder 10.4: Creating a Transaction Scenario Generator.
Working with Macros in Excel.
CHAPTER 11. Conclusion.
The Investment Banker’s Perspective.
The Investor’s Perspective.
The Issuer’s Perspective.
The Financial Guarantor’s Perspective.
The Big Picture Perspective.
Appendix: Using This Book with Excel 2007.
Index.
