Questions tagged [mbs]

Mortgage-backed securities.

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75 views

Understanding the Effective Duration and Convexity from Yield Book across MBS coupon stack

Yield Book, based on the 8/10 close, shows that the Effective Duration on 2.5s are greater than 3s and so on as we go up the stack. But with the PMMS at 4.99% on 8/10, I don't see how Eff. Duration, ...
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Economics of buying a dollar roll

This is a basic question. But I wanted to understand how a TBA short (buying the dollar roll) is economically short an MBS? For example, if an investor believes a specific coupon is rich, they could ...
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What is "Call a Deal" in structured finance space?

There are couple triggers in a structured finance deal . like when pool balance fall blow to a certian ration ( or bond balance fall below to a certain ratio agaist original issuance balance. But what ...
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Comparing TBA and Spec OAS

For a specific coupon, if TBA TOAS is greater than a Specs TOAS, does that imply that the Specs are trading too rich to TBAs (given liquidity risk, payup risk, etc)? I realize relative value ...
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MBS Index replication month-end flows

Several investors track indices to gain exposure to specific asset classes. And these indices may be re-balanced on a monthly basis, based on market-cap etc which generates month-end flows from ...
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Why did Ginnie Mae MBS Net issuance decrease significantly in 2020-2021?

Net Issuance of Agency MBS can be thought of as driven by Existing Home Sales, New Home Sales, Cash out Refis, Amortization and Non-Agency MBS runoff. Based on this definition of net issuance, is ...
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MBS Dollar roll mechanics

Had a few questions on MBS Dollar rolls: How are dollar rolls affected by Interest rate Volatility? Does the OAS of underlying pools matter to dollar rolls, and if so, how do they affect it? Does the ...
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PO (Principal only) mortgage bonds - Does Price or yield go up when interest rates go down?

I'm reading a book that states that PO mortgage bonds go up when interest rates go down as the prepayment happens faster. I'm confused whether prices go up on PO bonds or yields go up?
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What is the definition of horizon current coupon spread duration

Trying to understand the meaning of current coupon spread duration? Is this same as empirical mortgage spread duration?
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Relationship between prepayments and ZVOAS in MBS

If two models are producing ZVOAS for the same MBS, I'm trying to understand, all things the same, which one is projecting a higher prepayment rate. For example, would Model 1 be projecting a higher ...
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What is the TBA Option price convention and delta

I am wondering about price and delta about TBA options Use this trade example: One sell \$100 million ATM forward calls on 6.5% Fannie Maes for 24 ticks, and buy \$50 million ATM forward calls on ten-...
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What are the causes of positive convexity in the mortgage market?

In general, mortgage assets are negatively convex. However, I've seen cases of positive convexity and have never seen an adequate explanation for why this might be the case. I suspect it has ...
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Can MBS (Mortgage Backed Security) holing be the indicator of coming FRB tapering?

Question If MBS portion of the FRB agency holdings starts reducing, can it be said that FRB has started tapering or is it too naive to say so? Background It seems MBS is nearly 30% of the entire ...
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Where to get the total volume of MBS (Mortgage Backed Security) purchase by FRB

It looks one of the QE by FRB is via MBS according to The Real Lender on Your Mortgage Could Be the Federal Reserve. The sign of tightening QE can be measured by looking at the total volume of MBS ...
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Option Adjusted Spread - Monte Carlo

It's my understanding that in order to calculate the option adjusted spread on a mortgage backed-security, the following steps are required: Run a Monte Carlo simulation of interest rates Project ...
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Mortgage Backed Securities Settlement Date [closed]

How do settlement dates for non-TBA MBS work? Thanks, VVKK
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How to model fixed-rate loans or mortgages with act/365 but constant payment

My question I have a question on how to model the cashflows of fixed-rate loans or mortgages. Let's say the payments are monthly, and the rate remains constant throughout the life of the product; each ...
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Simulating a square root process with jumps for mortgage defaults

I am trying to simulate the paydown of a large pool of mortgage loans. For each monthly period, I am reducing principal by the scheduled principal payment (approximated by the WAC of the underlying ...
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Calculation of monthly interest and capital repayment in a variable rate mortgage

In my exercise, I take out a 240,000€ mortgage from a bank which I pay off over a period of 30 years. The interest rate is a market index plus a spread. Initally the market index is 1% and the spread ...
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Understanding Loans with a Dynamic Principal

A classic bond/loan has a clear-cut structure, a static principal $P$ and a coupon/yield $y$ (calculated off the static principal). Now surprisingly mortgage / car / etc loans seem to have a ...
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How to calculate aggregated conditional prepayment rates

I understand that the formula for loan-level CPR is: $$ CPR = 1 - ( 1 - SMM)^{12} $$ where $$ SMM = \frac{Prepaid monthly balance}{Scheduled Blance} $$ But Im not too sure how the formula changes ...
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Loan level model to understand drivers of mortgage prepayments

I am following up from my question here. As described there, I'm trying to assess the drivers of CPRs for a type of MBS. However, I want to understand, how a loan-level model of such a relationship ...
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How to set up data for understanding drivers of prepayments

I would like to understand the drivers of prepayment of a certain sector of MBS. I have some explanatory variables that I think would explain the actual CPR's and want to model the prepayments through ...
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Understanding the various terms for balances in MBS

I just started working in the MBS space and have a few questions about nomenclature. I've seen the terms "Unpaid Balance", "Collateral Balance", "Original Balance", "...
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How to calculate scheduled mortgage payment of a mortgage pass-through security?

I am trying to estimate the cash flows of Mortgage Backed Security. The example is present in the Fixed Income textbook written by Fabozzi. The problem and the solution is as follows:- Suppose there ...
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How to determine the cash flows of a Mortgage backed security?

Suppose there is a $400 million mortgage pass-through security with a 7.5% pass-through rate, a weighted average coupon of 8.125% and a weighted average maturity of 357 months, how to compute the cash ...
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How to calculate the monthly cash flows of Mortgage Pass through Security?

Suppose there is a $400 million mortgage pass-through security with a 7.5% pass-through rate, a weighted average coupon of 8.125% and a weighted average maturity of 357 months, how to compute the cash ...
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Any books on systematic investing in credit securitized products (RMBS, CLO)?

I'm looking for books/research papers that would have information on systematic strategies used in the Credit Securitized products space (specifically RMBS, CLO, etc.), if there are any? I've been ...
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Agency Fixed Rate RMBS Yield Decomposition

I'm trying to find the best way to decompose the yield on an index of fixed residential MBS securities and want to open up the question to the community. The goal is to look at this from a ...
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What is actually going on in Monte-Carlo simulation for Mortgage backed securities?

I just wanted to clear somethings up when it comes to pricing Mortgage backed securities using Monte-Carlo methods. I understand that interest rate paths have to be modelled in order to come up with ...
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Mortgage securities prepayment speed and YTM

From the MBS-CMOs brochure of Fidelity Investments, I read: For securities purchased at a discount to face value, faster prepayment rates will increase the yield-to-maturity, while slower ...
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How is CPR (re-)calculated for fixed fully amortizing agency mortgage pass-throughs given prior partial prepayments by mortgagors in the pool?

Background: in the US, mortgagors are allowed to prepay any amount and in any arbitrary time during the lifetime of the mortgage, which leads to prepayment risk if this deviation differs from the ...
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Developing Markov Transition Matrix

I’m working with historical credit performance data and would like to build a transition matrix to predict defaults and delinquencies. I can model the transition between states (ie current - ...
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Pricing structured products (Mortgage Backed Securities) [closed]

What would someone have to do to be able to price a structured product like Mortgage/Asset Backed Securities?
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How to calculate a prepayment penalty on a mortgage

I have issued 2 mortgages...one with an option to prepay the loan, the other without that option. I want an objective way of calculating the extra interest rate (compared to the second) and ...
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MBS Market Duration & Convexity

Soft question...hopefully. I am working on a swaption hedging strategy. Part of this strategy calls for a forward looking indication of changes in implied volatility, using 1m10y implied as a proxy ...
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How to compute the Net Leverage Ratio for a mortgage [closed]

In the introduction to the 4th video of lectures series Finance I on MIT Opencurseware (https://www.youtube.com/watch?time_continue=166&v=hyc8h5T76BE), Andrews Lo talks about the net leverage ...
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Why no prepayment fee for the reverse mortgage?

I am currently studying the costs (to lender) of adding certain additional options to the reverse mortgage, including the option of prepayment. Would there be any scenarios of housing price/mortgage ...
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Loan Level Data for Residential Mortgage Backed Securities

I'm looking for loan level detail for Residential Mortgage Backed Securities. The SEC requires that form ABS-EE (individual level asset data) be filed for all offerings backed by residential ...
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How is payment calculated for a mortgage when already missed one payment (D30)?

How is the interest and principal payment calculated when mortgage has already missed one payment? Are the new payments calculated off the new balance (non-amortized balance) or the original scheduled ...
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Finding MBS OAS in practice

I'm reading Fabozzi's Bond Markets, Analysis and Strategies, and I have a practical question about finding OAS. The book basically says you simulate interest rate paths and take the average price of ...
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How turnover rate is dependent on mortgage rate?

I am new to finance so may be this is a silly question but I got stuck here. I was thinking about how turnover rate is dependent on mortgage rate? I was reading MBS by Lakhmir Hayre, there I had seen ...
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Book recommendation for Prepayment model of Mortgage Backed Securities

Can you please suggest me some good reference for Prepayment model of Mortgage Backed Securities. I am looking for a basic book from more of mathematical point of view. P.S.- I am new to finance.
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NPV of a mortage loan

I need to model the expected NPV of a mortage loan over his whole life-time. Assume that only the prepayment and default risk matters and that these events can occour at only discrete time-points. I'm ...
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Interpretation of OAS on MBS

I'm struggling a little with the interpretation of option adjusted spread on mortgage backed securities. I can see how, for a corporate bond without optionality, the z-spread is sort of like a ...
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Calculating the Cost of Delay

I am working on a problem in Davidson and Herskovitz workbook titled the Mortgage-Backed Securities Workbook. The questions asks to find the total opportunity cost to the investor of having a $1 ...
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General Mortgage Backed Securities

I understand the basic workflow of MBS, such as securitization, and.etc. I was wondering the following things: The relationship between agency product, securities, and pools: Is ONE security exactly ...
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General Framework For Valuing Mortgages

I am becoming more interested in mortgage valuation and would like some pointers on the basic valuation process for a mortgage. I understand there is likely an entire field of study devoted to valuing ...
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Number of mortgages in a MBS

Is it possible to know the typical number of mortgages that can be packaged into a MBS product, e.g. a pass-through MBS, or an agency backed TBA. I think the minimum size is \$1-million but if a ...
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How to calculate the initial payment of a graduated payment mortgage (GPM). Real estate Mortgage analysis

My professor used this: 12%, monthly-pmt, 30-yr GPM with 4 annual step- ups of 7.5% each, then constant after year 4: $$L=PMT \left[ PV(0.01,12,1) + \frac{1.075}{1.01^{12}}PV(0.01,12,1) + \frac{1....
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