Structured Finance in 2024: Observations on Trading and Risk Management Practices in the ABS, MBS, CMBS Markets

The markets for asset-backed instruments navigated a rough macroeconomic landscape in 2023. Record-high interest rates, high (but moderating) inflation, tighter lending standards and rising delinquencies in certain segments of the market created challenges for firms in these markets. 

Likewise, the commercial mortgage-backed securities (CMBS) market faced several negative headlines in 2023, such as those spotlighting high-profile office loan defaults and sector-wide declines in valuations.  

This whitepaper, authored by Kelli Sayres, Senior Managing Director, Product, PolyPaths at Numerix, explores the trends and market dynamics of structured fixed income securities, including ABS, MBS, and CMBS. Kelli shares her views on the various challenges participants in these products face. Topics covered include:

• The road ahead for the ABS, MBS and CMBS markets for the remainder of 2024 
• Where Numerix clients are focused on managing the risks of asset-backed instruments 
• Role of machine learning in managing prepayment risk 
• Structured finance and the need for sound risk management