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9780470047736

Mortgage-Backed Securities : Products, Structuring, and Analytical Techniques

by ; ;
  • ISBN13:

    9780470047736

  • ISBN10:

    0470047739

  • Format: Hardcover
  • Copyright: 2007-07-01
  • Publisher: Wiley

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Summary

An in-depth look at the latest innovations in mortgage-backed securities The largest sector of the fixed-income market is the mortgage market. Understanding this market is critical for portfolio managers, as well as issuers who must be familiar with how these securities are structured. Mortgage-Backed Securities is a timely guide to the investment characteristics, creation, and analysis of residential real estate-backed securities. Each chapter contains cutting-edge information for investors, traders, and other professionals involved in this market, including discussions of structuring mortgage products-such as agency CMOs and new types of mortgages-and an in-depth explanation of the concept of option-adjusted spreads and other analytical concepts used to assess relative value. Frank J. Fabozzi, PhD, CFA, CFP (New Hope, PA) is the Frederick Frank Adjunct Professor of Finance at Yale University's School of Management. Anand K. Bhattacharya, PhD (Westlake Village, CA) is a Managing Director at Countrywide Securities Corporation. William S. Berliner (Westlake Village, CA) heads the Trade Strategies Group at Countrywide Securities.

Author Biography

Frank J. Fabozzi is Professor in the Practice of Finance in the School of Management at Yale University. Prior to joining the Yale faculty, he was a Visiting Professor of Finance in the Sloan School at MIT. He is a Fellow of the International Center for Finance at Yale University and on the Advisory Council for the Department of Operations Research and Financial Engineering at Princeton University. Professor Fabozzi is the editor of the Journal of Portfolio Management and an associate editor of the Journal of Fixed Income. He earned a doctorate in economics from the City University of New York in 1972. In 2002 was inducted into the Fixed Income Analysts Society’s Hall of Fame and is the 2007 recipient of the C. Stewart Sheppard Award given by the CFA Institute. He earned the designation of Chartered Financial Analyst and Certified Public Accountant. He has authored and edited numerous books in finance.

Anand K. Bhattacharya is a Managing Director at Countrywide Securities Corporation (CSC), a wholly owned affiliate of Countrywide Financial Corporation. He joined CSC in 1999, where he is responsible for the management of fixed income research and strategies. Immediately prior to joining Countrywide, he was Managing Director responsible for capital markets, risk management and portfolio management oversight at Imperial Credit Industries Inc (ICII) from March 1998 to January 1999. Prior to his employment at ICII, Dr. Bhattacharya held positions at Prudential Securities Inc. from 1990 to 1998 with the most recent position as Managing Director, Global Head of Fixed Income Research. His prior employment includes positions in fixed income research and product management at Merrill Lynch Capital Markets, Franklin Savings Association and its subsidiaries and Security Pacific Merchant Bank. Dr. Bhattacharya has written extensively in various facets of fixed income analysis and portfolio management. He has authored or coauthored over 65 publications in various academic and professional journals and industry handbooks. He holds a Ph.D. in Finance and Quantitative Methods from Arizona State University.

William S. Berliner is Executive Vice President in charge of the Mortgage Strategies group at Countrywide Securities Corporation. In this capacity, he oversees the generation of relative value analysis and strategies, and writes and edits many of the firm’s reports and publications. He began his career in the Government Operations Department of Bear, Stearns and Co. in 1985. He moved to the Mortgage trading desk in 1987 as a clerk and joined the CMO desk in 1989. He worked on the CMO desk at Bear until 1993, when he left to join Nikko Securities, where he eventually ran CMO trading. He joined Countrywide as a trader in 1996 and moved to the Research Department in early 1998. Mr. Berliner has a BA in Interpersonal Communications from Rutgers College and an MBA in Finance from the Rutgers Graduate School of Business.

Table of Contents

Preface
About the Authors
Introduction to Mortgage and MBS Markets
Overview of Mortgages and the Consumer Mortgage Market
Overview of Mortgages
Mortgage Loan Mechanics
Risks Associated with Mortgages and Mortgage Products
Overview of the Mortgage-Backed Securities Market
Creating Different Types of MBS
MBS Trading
The Role of the MBS Markets in Generating Consumer Lending Rates
Cash Flow Structuring
Prepayment and Default Metrics and Behavior
Measurement of Prepayments and Defaults
Prepayment Convention Terminology
Delinquency, Default, and Loss Terminology
Prepayment Behavior and Performance
Prepayment Behavior
Drivers of Prepayment Activity
Additional Factors Affecting Prepayment Speeds
Prepayment Behavior of “Nonfixed-Payment” Products
Summary
Structuring
Introduction to MBS Structuring Techniques
Underlying Logic in Structuring Cash Flows
Structuring Different Mortgage Products
Fundamentals of Structuring CMOs
Fundamental MBS Structuring Techniques: Divisions of Principal
Time Tranching
Planned Amortization Classes (PACs and the PAC/Support Structure
Targeted Amortization Class Bonds
Z-Bonds and Accretion-Directed Tranches
A Simple Structuring Example
Fundamental MBS Structuring Techniques: Divisions of Interest
Coupon Stripping and Boosting
Floater/Inverse Floater Combinations
Two-Tiered Index Bonds (TTIBs
Excess Servicing IOs
Structuring Private Label CMOs
Private Label Credit Enhancement
Private Label Senior Structuring Variations
The Structuring of Mortgage ABS Deals
Fundamentals of ABS Structures
Credit Enhancement for Mortgage ABS Deals
Factors Influencing the Credit Structure of Deals
Additional Structuring Issues and Developments
Valuation and Analysis
Techniques for Valuing MBS
Static Cash Flow Yield Analysis
Zero-Volatility Spread
Valuation Using Monte Carlo Simulation and OAS Analysis
Total Return Analysis
Measuring MBS Interest Rate Risk
Duration
Convexity
Yield Curve Risk
Other Risk Measures
Illustration of Risk Measures
Summary
Evaluating Senior MBS and CMOs
Yield and Spread Matrices
Monte Carlo and OAS Analysis
Total Return Analysis
Comparing the Analysis of Agency and Private Label Tranches
Evaluating Inverse Floaters
Summary
APPENDIX: An Option-Theoretic Approach to Valuing MBS
Option-Theoretic Models for Valuing MBS
An Option-Based Prepayment Model for Mortgages
Valuation of Mortgages
A Closer Look at Leapers and Laggards
Valuation of MBS
Summary
Index
Table of Contents provided by Publisher. All Rights Reserved.

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