Securitisation Swaps

Foreword

I first met Mark in London in March 2007. He had taken a transfer from head office in Australia to join our UK Market Risk team as a model validation quant. Mark's timing was impeccable – the start of the global financial crisis and one of the most extraordinary chapters in the history of financial markets was only a few months away. By September, depositors were queuing outside Northern Rock and within a year Lehman Brothers would collapse. These events, and those that followed, would shape our careers and lead to the book you hold today.

Shortly after Mark started, chatter about the new ‘risk guy’ began to emerge. Mostly that he might have a personality, but also that he was a problem‐solver, someone eager to learn and work with front office to get things done. It didn't take long for him to make an impression on me either with his enquiring mind and intellect (who gets a maths PhD and a law degree?).

The collapse of Lehman's was the defining moment of the crisis, when the sheer scale of the credit and liquidity binge was finally laid bare for all to see, leaving the financial universe staring into the abyss. It was at this point that I was tasked with taking over the bank's capital markets structuring portfolio. That team had avoided CDOs and CLOs (not the bank however, where we had billions of dollars of CDOs in an SPV) but there was still correlation, credit and funding risk not being captured or valued and requiring serious work to sort out. With that transpired ...