I am reading about ABS avoiding esoteric instruments with complex structures and I want to learn about pricing methods and trading of these instruments thinking about futures applications for decentralized finance (DeFi), do you think these instruments can be a good alternative for retail investor or is it something useful only for the big players? I want to focus efforts on debt backend assets like CMO and CLO, something introductory on these topics, I really apreciate any source or guidance you can give me.

Some sources that I reviewed were:


1 Answer 1


To answer your questions in order:

  • MBS and ABS are usually not considered retail-friendly products because of the complexity of their risk factor exposures (spread, prepayment, credit, interest-rates, volatility, liquidity etc) along with risks associated with the securitization process in and of itself. The initial excursions into DeFi on this front have (to my knowledge) unsurprisingly focused on relatively vanilla structures such as short-duration mortgages. See: DeFi Securitized Mortgage Fund.
  • The best overall introduction to MBS and ABS in my opinion remains "The Salomon Smith Barney Guide to Mortgage-Backed and Asset-Backed Securities", although it is starting to show its age (it was written in 2001). Still, reading/browsing through it will give you a solid introduction to the current institutional landscape of MBS and ABS.
  • $\begingroup$ Thanks for your answer @Sharad, the New Silver's proposal for financial products using SPV and NFT is very interesting, I hadn't really heard about it, about your book recommendation, I was reading about content and it looks exactly like what I'm looking for, one last question, do you think it's pertinent to read something after the 2008 crisis? $\endgroup$ Commented Jun 13, 2022 at 4:32
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    $\begingroup$ Definitely, although I don't know of a good standalone resource. Googling "post Dodd-Frank securitization landscape" should give you some leads. MBS/ABS/Securitization are huge topics and you have to start somewhere hence my initial recommendation. $\endgroup$
    – Sharad
    Commented Jun 13, 2022 at 13:05

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