Understanding Structured Products

Mortgage-Backed Securities (MBS)

Mortgage-Backed Securities pool thousands of home loans into tradable bonds, giving investors broad exposure to the U.S. housing market. Issued by government-sponsored entities such as Fannie Mae, Freddie Mac, and Ginnie Mae, Agency MBS are among the most liquid and creditworthy fixed-income instruments. Their performance is influenced by borrower behavior—especially prepayments—which shift with interest rates and economic conditions.

At SQX, we provide evaluated pricing on over 1 million Agency MBS, using market-based yields and cashflow models informed by housing, employment, and remittance data. Each valuation is benchmarked against comparable securities to ensure consistency.

Asset-Backed Securities (ABS)

ABS are securities backed by assets such as credit card receivables, auto loans, and student loans. Their performance depends on collateral type, structure, and borrower behavior. Essentially, the cashflows from the underlying loans are passed through to investors, with payments of interest and principal depending on how borrowers repay their debts.

We deliver daily valuations on approximately 20,000 ABS, applying benchmark yield curves, tranche-level adjustments, and new-issue pricing. Default and prepayment assumptions are carefully tuned, and outputs are checked against trade data and market color to ensure accuracy.

Commercial Mortgage-Backed Securities (CMBS)

CMBS are created by pooling loans secured by commercial real estate properties like office buildings, hotels, and shopping centers. Investors in CMBS receive payments that ultimately come from tenants paying rent and businesses repaying their mortgages. Senior tranches are paid first and offer more stability, while subordinate tranches take on more risk in exchange for higher potential returns.

SQX prices about 23,000 CMBS, using deal type, vintage, and shelf data alongside property-level metrics. This rigorous approach allows clients to evaluate credit-sensitive bonds with confidence.

Collateralized Mortgage Obligations (CMO)

CMOs are structured from pools of residential mortgages. Unlike traditional MBS, they are divided into tranches with differing maturities, coupons, and risk levels. Investors can match cashflow profiles to their investment needs, but the trade-off is that CMOs carry risks tied to borrower behavior, such as prepayment and default.

SQX covers over 265,000 non-agency CMOs, modeling tranche-level cashflows with market-driven prepayment and default assumptions, then validating against shelf quality, servicer performance, and peer structures.

Collateralized Loan Obligations (CLOs) & Collateralized Debt Obligations (CDOs)

CLOs pool syndicated corporate loans, while CDOs may include a wider range of debt instruments. They’re structured in layers (senior, mezzanine, equity), with returns tied to both underlying loan performance and manager expertise.

We price over 20,000 CLOs and CDOs daily. Our models are built to account for manager ratings, tranche-level adjustments, NAV-based overcollateralization analysis, and default/recovery assumptions. Prices are validated against observable market trades, giving clients dependable benchmarks.

Why SQX?

Structured products—with all their complexity and diversity—demand detailed analytics, timely data, and careful validation. SQX’s evaluated pricing services combine observable market inputs with disciplined modeling and rigorous quality assurance. We offer our clients everything they need to be confident in the data we provide, including daily or intraday updates, full transparency, flexible service, and cost-effective pricing.

Whether it’s MBS, ABS, CMBS, CMOs, or CLOs/CDOs, SQX is the ideal partner for institutions seeking reliable data. Interested in learning more about our structured product coverage? Contact us today!

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