9
$\begingroup$

I need to model MBS coupon stack prices. It would not be difficult to create something from scratch, but I don't want to re-invent the wheel (and explain why I did) if a somewhat standard model already exists. By "somewhat standard", I mean models like those for the term structure (e.g. Nelson-Siegel / Nelson–Siegel–Svensson or some newer stuff by Diebold et al).

I would appreciate any pointers, no matter how obscure.

| improve this question | |
$\endgroup$
  • $\begingroup$ Hi, good question but could you please elaborate a little more on what is the payoff of a " MBS coupon stack". Regards $\endgroup$ – TheBridge Feb 9 '11 at 21:04
  • $\begingroup$ @TheBridge: The MBS coupon stack is the series of prices for TBA (to-be-announced) MBS at various coupons. It's not a security, it's a set of securities (like the term structure is a set of bonds over different maturities). $\endgroup$ – Joshua Ulrich Feb 11 '11 at 20:11
1
$\begingroup$

I am not familiar with any formal "models" of the TBA coupon stack similar to Nelson-Siegel, but we typically compare the TOAS and ZV (Z-spread) curves as a function of coupon and issuer/maturity. We also examine relative value between these curves and various seasoned loan pools. The curve itself is very erratic, and plotting it often gives a good impression of which particular points on the curve may be over/under-valued. I have dealt with a number of market participants (traders) in this area over the years, and it seems like much is still done by guess-timating.

That said, there are a few references on TBAs generally by Citigroup, JPMorgan, the Fed and probably others. I couldn't find a reference to a model of the TBA coupon stack in any of these.

| improve this answer | |
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.