What is the future of structured finance/securitization?

R&R Consulting has advised over 250 clients including public companies, media, and clients of independent financial research consortia, on business opportunities in the structured finance market.

We try to stay two steps ahead of the market by understanding its history and the dynamic forces shaping it. We first visualized it strategically in early 2000 using the game of GO (圍棋)—a paradigm of the winner-take-all game—to represent the strategies of different capital market institutions.

In the 2000 state of play (佈局), credit rating agencies (CRAs) were at the center of the map, directing the flow of capital invisibly to all but the inner ring of institutions.

Two opposed trends pushed the shape of the “board”:

• Advisory and accounting firms entered CRAs’ lucrative structuring advisory space;
• Niche quantitative firms moved capital towards the boundaries of cash and synthetic markets to exploit the inefficiencies of rating methods—in some cases with the CRA participating.

What happened next was a collision of financial myths and facts. The failures tend to repeat themselves; mathematics and engineering show us a way out. Knowledge of the evolutionary path of mathematics and engineering – the triumphs and setbacks – helps R&R stay two steps ahead of the market.