176 reputation
5
bio website bionicturtle.com
location
age
visits member for 3 years, 5 months
seen Oct 31 '13 at 3:08

Jan
29
comment Can duration gap analysis be applied to mortgages?
@Pasha, my recommendation is the text i cited above (Fixed Income Securities by Pietro Veronesi). I learned what i know from Bruce Tuckman's Fixed Income Securities, which is EXCELLENT still after ~10 years. You cannot go wrong with either, both are assigned in FRM. Of course, Fabozzi also has a couple of popular books.
Jan
19
comment Can duration gap analysis be applied to mortgages?
@Pasha - To my knowledge, Macaulay duration cannot be applied with mortgages/MBS: the prepayment (an embedded option) implies that maturity varies with yield. I suppose you could try Mac duration = effective * (1+yield/k) but I am unclear to what end and don't see how it can have the traditional "weighted average maturity" definition that works for vanilla bonds (i.e., in a vanilla bond, you actually do weight maturities, but not here).
Jan
19
comment Can duration gap analysis be applied to mortgages?
... I should say, the duration formula is calculating -1/P(r)*slope (slope is the dollar duration, not duration) as this is rise/run: [Price(r+b) - Price(r-b)]/(2*b)
Mar
24
comment Using Black-Scholes equations to “buy” stocks
... actually, the worst part of the model risk is probably that by using BSM you assume the future asset price is lognormaly distributed