Validity proves whether the rules governing a structured product can logically coexist — before capital is deployed.
Structured finance instruments are defined by dense systems of triggers, thresholds, and conditional obligations. Validity transforms these systems into formally verifiable models, producing definitive outcomes: consistent, contradictory, or formally indeterminate.
Modern structured products embed intricate rule systems across offering memoranda, indentures, and servicing agreements. These rules govern payment waterfalls, trigger events, and portfolio constraints.
Despite their precision, they are evaluated through manual review and scenario-based modelling — approaches that cannot exhaustively detect internal contradiction.
As structural complexity increases, so does the risk of latent logical conflict.
Validity applies a deterministic pipeline to structured finance documentation:
The result is a provable determination of whether the structure's governing rules can simultaneously hold.
Payment waterfalls, trigger mechanisms, and covenant systems are inherently logical constructs.
Validity represents these constructs as formal constraints and evaluates them collectively, identifying:
Contradictions are not inferred — they are proven.
Traditional analysis relies on sampling possible outcomes. Validity evaluates the full constraint system simultaneously.
Where contradictions exist, Validity returns a minimal unsatisfiable core — the smallest set of commitments that cannot all be true.
Each element of this core is traceable to:
Within its defined logical fragment, Validity identifies provable structural defects, including:
These are formal failures of the structure itself, independent of market performance.
Validity does not model cashflows, predict performance, or assess credit quality.
It evaluates only whether the governing rules of a structured product are internally consistent within a defined logical system.
Where a rule cannot be formally represented, it is explicitly classified as UNDERDETERMINED. No approximation. No silent omission.
Validity integrates into structured finance processes including:
Each analysis produces a cryptographically signed Proof Object containing:
Proofs are version-bound, reproducible, and independently verifiable.
A structured product is only as sound as the rules that define it. Validity proves those rules can hold.
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