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

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  • Format: eBook
  • Copyright: 2007-09-01
  • Publisher: Wiley
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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.

Table of Contents

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
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
Yield Curve Risk
Other Risk Measures
Illustration of Risk Measures
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
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
Table of Contents provided by Publisher. All Rights Reserved.

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