Hi all,I've "known" securitization for a while, but only from far... I now have to get my hands dirtyand come up with something. The thing is that most papers are either overly simplified or incredibly tough... I can't find anything in between! The context would be the one from an investment banker: I've got a couple a future cash flows (say 10),and I want to pledge them in exchange of immediate cash. From that point, what are the steps? I've been told to make tranches yielding 5%, 7.5% and 10% (it's an example...) . Ok, great, by can I calculate the attachment and detachment points of my tranches for paying such returns? Are thesesreturns even achievable? How can I know? What do I need for making this computation? It seems it's all based on the credit rating and once you've got it, it's straightforward. Still, say I'vegot the rating, how do I derive the attachment/detachment points and returns that I can make? Well, as you see, it's a pretty big mess in my head right now... I'm not asking for a solution (but ifyou have...), but rather kind of a tutorial or a recipe with the fundamental steps and their requiredinputs. Any paper would be great!Thanks a lot

I also know from textbook no industry experience but let me try..i think you are building CDO structure. so attachment point really depends on credit enhancement you need for a certain credit rating. suppose we have three tranches A, BB, C, A rating requires subordinate 75%, BB 20%, C 5%. so for BB attachment pt is 20% and 75% is detachment pt. next thing is for A tranche percentage of notional to total notional is 25%. I am not sure how to select cash flow to result in 5% yield for tranche A and etc. I presume paying frequency is monthly and the yield depends on the mortgage rate? Regards

Generally structured pricing works something like this:1) generate correlated default vectors for the underlying collateral 2) Run them through cashflow waterfall with some prepayment and loss severity/LGD assumptions where the attachment/detachment points dictate the losses for the individual tranchesSo for your application, you'll need some brute force solver to to wiggle the attachment/detachment points till you get the yield and discount margin on the individual tranches to match whatever you need it to be.