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

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  • Edition: 2nd
  • Format: Hardcover
  • Copyright: 2011-09-21
  • Publisher: Wiley

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Supplemental Materials

What is included with this book?


The book will cover: Overview of what has happened in the past 3 years in the mortgage securitization market Current state of the market The uncertain futures of the GSEs; The roles of the rating agencies (both past and future); Regulatory changes and their impact Revised valuation techniques: the fact that all non-agency MBS must be treated as "credit pieces" and valued using credit analysis techniques; The interaction between the mortgage industry, home prices, and credit performance.

Author Biography

Frank J. Fabozzi, PhD, CFA, is Professor of Finance at EDHEC Business School and a member of the EDHEC-Risk Institute. Prior to joining EDHEC, he held various professorial positions in finance at Yale University's School of Management from 1994 to 2011 and, from 1986 to 1992, was a visiting professor of finance and accounting at MIT's Sloan School of Management. He is also Editor of the Journal of Portfolio Management.

Anand K. Bhattacharya, PhD, is a Professor of Practice in the Department of Finance, W. P. Carey School of Business, Arizona State University, and a Fixed Income Strategist with Stifel, Nicolaus & Company, Inc. He has consulted with various financial institutions on issues of balance sheet restructuring and asset valuation.

William S. Berliner is the Principal of Berliner Consulting & Research, LLC, a boutique firm specializing in mortgages and mortgage-backed securities. His primary focus is security and loan valuation and hedging, serving both institutional investors and mortgage originators. Berliner also writes a monthly column for Asset Securitization Report.

Table of Contents

Prefacep. xi
About the Authorsp. xv
Introduction to Mortgage and MBS Marketsp. 1
Overview of Mortgages and the Consumer Mortgage Marketp. 3
Overview of Mortgagesp. 4
Mortgage Loan Mechanicsp. 12
Risks Associated with Mortgages and Mortgage Productsp. 17
Concepts Presented in this Chapterp. 22
Overview of the Mortgage-Backed Securities Marketp. 23
Creating Different Types of MBSp. 24
MBS Tradingp. 35
The Role of the MBS Markets in Generating Consumer Lending Ratesp. 40
Cash Flow Structuringp. 44
Concepts Presented in this Chapterp. 46
Payment and Default Metrics and Behaviorp. 47
Measurement of Prepayments and Defaultsp. 49
Prepayment Terminologyp. 50
Calculating Prepayment Speedsp. 52
Delinquency, Default, and Loss Terminologyp. 66
Concepts Presented in this Chapterp. 16
Prepayments and Factors Influencing the Return of Principalp. 77
Prepayment Fundamentalsp. 77
Factors Influencing Prepayment Speedsp. 85
Defaults and "Involuntary" Prepaymentsp. 92
Concepts Presented in this Chapterp. 97
Structuringp. 39
Introduction to MBS Structuring Techniquesp. 101
Underlying Logic in Structuring Cash Flowsp. 102
Structuring Different Mortgage Productsp. 103
Fundamentals of Structuring CMOsp. 106
Fundamental MBS Structuring Techniques: Divisions of Principalp. 109
Time Tranchingp. 110
Planned Amortization Classes (PACs) and the PAC-Support Structurep. 116
Targeted Amortization Class Bondsp. 130
Z-Bonds and Accretion-Directed Tranchesp. 130
A Simple Structuring Examplep. 134
Concepts Presented in this Chapterp. 140
Fundamental MBS Structuring Techniques: Division of Interestp. 141
Coupon Stripping and Boostingp. 143
Floater-Inverse Floater Combinationsp. 147
Two-Tiered Index Bonds (TTIBs)p. 156
Excess Servicing IOsp. 160
Concepts Presented in this Chapterp. 166
Structuring Private-Label CMOsp. 167
Private-LabeljCredit Enhancementp. 169
Private-Labell Senior Structuring Variationsp. 176
Governing Documentsp. 189
Concepts Presented in this Chapterp. 191
The Structuring of Mortgage ABS Dealsp. 193
Fundamentals of ABS Structuresp. 194
Credit Enhancement for Mortgage ABS Dealsp. 199
Factors Influencing the Credit Structure of Dealsp. 201
Additional Structuring Issues and Developmentsp. 203
Concepts Presented in this Chapterp. 208
Valuation and Analysisp. 209
Techniques for Valuing MBSp. 211
Static Cash Flow Yield Analysisp. 211
Z-Spreadp. 213
Valuation Using Monte Carlo Simulation and OAS Analysisp. 214
Total Return Analysisp. 226
Concepts Presented in this Chapterp. 229
Measuring MBS Interest Rate Riskp. 231
Durationp. 231
Convexityp. 238
Yield Curve Riskp. 241
Other Risk Measuresp. 242
Concepts Presented in this Chapterp. 244
Evaluating Senior MBS and CMOsp. 245
Yield and Spread Matricesp. 246
Monte Carlo and OAS Analysisp. 262
Total Return Analysisp. 268
Evaluating Inverse Floatersp. 274
Concepts Presented in this Chapterp. 279
Analysis of Nonagency MBSp. 281
Factors Impacting Returns from Nonagency MBSp. 281
Understanding the Evolution of Credit Performance within a Transactionp. 284
The Process of Estimating Private-Label MBS Returnsp. 290
Concepts Presented in this Chapterp. 304
Appendix: An Option-Theoretic Approach to Valuing MBSp. 305
Option-Theoretic Models for Valuing MBSp. 306
An Option-Based Prepayment Model for Mortgagesp. 307
Valuation of Mortgagesp. 311
A Closer Look At Leapers and Laggardsp. 319
Indexp. 327
Table of Contents provided by Ingram. All Rights Reserved.

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