Tavakoli Structured Finance® (TSF), founded in 2003, is an independent consulting firm for credit derivatives, synthetic collateralized debt obligations, mortgage backed securities, mortgage derivatives, complex derivatives, interest rate swaps, special purpose entities, total return swaps, repurchase agreements (repos), options, and synthetic structured financial products. TSF provides consulting to financial institutions, law firms, and insurance companies on risk management and expert witness consulting.
Topics include risk management, global systemic risks, contract language, documentation issues, global investor demand, product development, funding cost reduction, hedging strategies, accounting issues, fraud, bank balance sheet risks, and economic capital requirements.
Credit derivatives present challenges on both a stand-alone basis and when embedded in structured financial products. TSF has provided consultation to buyers and sellers of credit derivatives on documentation, liquidity issues, valuation, economic capital requirements, and negotiated dispute resolution without lawyers.
Other consultations include language to limit risk and potential disputes about what qualifies as a credit event, notice of a credit event, satisfaction of delivery requirements, exit pricing mechanisms, calculation of cash settlement (where applicable), and language of time lines, among other issues.
Strategy and application consultations include trading strategies, sovereign credit default swaps, shorting indexes including credit derivative indexes (the “big short”), reducing funding costs, hedging strategies, identifying inaccurately rated products, accounting issues, economic capital requirements, documentation, risk management, product development, global systemic risks, credit risk, and global investor demand.
Securitizations: Synthetic RMBS, CDO, CLO, ABS and more
TSF consults for expert witness purposes on customs and practices of underwriting including residential mortgage backed securities (RMBS), collateralized debt obligations (CDO, CDO-squared, single tranche CDO, et.al.), collateralized loan obligations (CLO), collateralized mortgage obligations (CMO), constant proportion debt obligations (CPDO), asset backed securities (ABS) and other securitizations.
TSF identified hundreds of billions of dollars worth of misrated and overvalued CDOs. TSF gave early warning about the systemic risk posed by these built-to-fail structured products and the indexes and credit derivatives that referenced them.
TSF aids in dispute negotiations to agree on satisfactory financial outcomes without the need for time-consuming litigation.
Early Warnings of Balance Sheet and Systemic Risks
TSF has given early warning on the systemic risks posed by widespread systemic fraud involving RMBS and CDOs. Credit derivatives, credit derivatives and total return swaps that referenced these products provided leverage that amplified the risk. Early warnings prior to the financial crisis included problems at AIG, MBIA, Ambac, FGIC, Merrill Lynch, Bear Stearns, Freddie Mac, Fannie Mae, and more.
Today, individual balance sheet risks on both the banking and corporate level stem from understatement of risks and overstatement of risk adjusted earnings. Recurring systemic problems in the global financial system stem from large pockets of overvalued assets combined with leverage. TSF provides consultation on how to avoid or minimize these risks.