Bloomberg Wealth Management Solutions John Bridge, CFA

ECONOMIC IMPROVEMENT FIXED INCOME TRADING FIXED INCOME VALUATION FOR STRUCTURED ASSETS PORTFOLIO RISK MANAGEMENT AGENDA

Changes in the housing market, debt and savings rates, as well as borrowing and lending liquidity have altered the wealth management landscape. They are now showing signs of improvement Fixed Income TradingFixed Income ValuationPortfolio Risk Management 1 ECONOMIC IMPROVEMENT Economic Improvement

Housing Market Turn? Case Shiller 10 city housing price index New Home Sales Existing Home Sales Fixed Income TradingFixed Income ValuationPortfolio Risk ManagementEconomic Improvement First increase in housing prices since June 2006

Consumer Debt and Personal Savings Consumer debt has dropped for the first time since 1992 Personal Savings are at an all time high. Fixed Income TradingFixed Income ValuationPortfolio Risk ManagementEconomic Improvement

Overnight Index Swap Lending liquidity between banks is improving Fixed Income TradingFixed Income ValuationPortfolio Risk ManagementEconomic Improvement OIS spread hovered around 8 basis points from 2001 to July of Spread hit an all time high of 364 basis points on 10/10/08. We are now below 30 basis points

Find bonds that have been issued or trade under the various rescue programs so that you can take advantage of government sponsored guarantees and meet due diligence requirements by ensuring that you are quoted a fair price. 2 FIXED INCOME TRADING Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

Bloomberg Bailout and Rescue Program Transparency Menu Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

TARP and Temporary Liquidity Guarantee Bonds Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

Live Execution for FDIC Guaranteed Bonds Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

MSRB and TRACE reporting Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

The potential overhaul of regulatory oversight is heightening the awareness and importance of fiduciary responsibility. Proper and detailed valuation methods for structured products are critical to due diligence. Bloomberg has the proper tools that you need to value MBS and structured notes so that you meet or exceed these requirements. 3 FIXED INCOME VALUATION Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

RMBS structured pay down without loss assumptions Historical Constant Default rate is 12.98, loss severity is Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

RMBS structured pay down with loss assumptions Model losses using 13% annual default rate, and a 30% severity. 2A1 loses 2.12% with first loss in March A2 loses 23.35% with first loss date in June 2011 Reasonable default and severity assumptions produce very different return results. Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

“Super Yield Table” stratifies the collateral Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Perform loss analysis by varying loss assumptions for subsets of your collateral. In this case, we are using days delinquent.

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Select all loans with a debt service coverage ratio < 1.2. Resulting loans with a debt service coverage ratio < 1.2. CMBS Advanced Scenarios

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation CMBS Advanced Scenarios Three independent loan groups with custom loss assumptions

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation CMBS Advanced Scenarios Structure Pay down

Bloomberg’s Structured Notes Menu Structure, price, and search for equity, fx, interest rate structured notes. Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

“Capital Protected” Structured Note Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

The potential overhaul of regulatory oversight is heightening the awareness and importance of fiduciary responsibility. Proper and detailed valuation methods for structured products are critical to due diligence. Bloomberg has the proper tools that you need to value MBS and structured notes so that you meet or exceed these requirements. 4 Portfolio Risk Management Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Portfolio Slice and Dice

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Portfolio Slice and Dice Industry and Single Security Breakdown

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Portfolio Slice and Dice Distribution

Key Rate Duration Industry Breakdown Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Key Rate Duration Single Security Breakdown

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Value at Risk Industry Breakdown

Economic ImprovementPortfolio Risk ManagementFixed Income TradingFixed Income Valuation Value at Risk Industry Breakdown

Questions? Portfolio Risk ManagementFixed Income ValuationFixed Income TradingEconomic Improvement