Securitised products - evaluating the software business case

Overview – to build or not to build...

Hamel was engaged to evaluate the possibility of creating software to model Securitised Products. The software was to be developed by a third-party, not involved in the creation and delivery of securitised products, and was to be marketed as either a branded or white label product. Potential purchasers were thought to be Investment Banks (issuers of security products), Credit Rating Agencies (evaluators of financial models used to price security products) and Investors (purchasers of security products).

The driver for the proposed software product was the recognition that the US and European markets for securitised products was changing – the markets were maturing, characterised by the demand for more standardised financial modelling and for the use of more advanced modelling techniques, particularly Monte Carlo simulation.

 

Initial question

Before designing a prototype, the first step was to conduct a commercial review of the proposed software product – could it be built to an acceptable cost and in an acceptable time frame, and would anyone buy it? This review was achieved through a mixture of desk research and industry interviews.

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