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Questions tagged [mbs]

Mortgage-backed securities.

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What's the rate of return on a mortgage?

I'm trying to understand mortgages from first principles, from the perspective of a borrower. Let $S_t$ be the price of the asset bought with the loan at time $t$ (i.e. house). Let $\alpha$ be the ...
user357269's user avatar
1 vote
2 answers
651 views

TBA - what is and isn't a TBA? (help please)

this is probably a naming issue - but i am totally confused as the documentation is never clear. I understand well what a generic TBA is, what is a "STIP"? is it also a form of TBA? One doc ...
user67825's user avatar
1 vote
1 answer
262 views

Does TBA become MBS after pool is announced?

Is TBA still called TBA after the pool is announced? Can it be said that TBAs are still traded after the announcement or are all those trades effectively in MBS? I am looking to understand market for ...
Bard's user avatar
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2 votes
2 answers
140 views

Should one use the 30y bond alongside shorter tenors to hedge a MBS book?

Say I build a US treasury curve or swap by bootstrapping 2/3/5/7/10/20/30y on the run bonds. Say I have a prepayment model and an OAS model and I can generate key rate dv01s for the book as dBookNPV / ...
Philippe Hatstadt's user avatar
2 votes
2 answers
245 views

MBS benchmarking

I am trying to find some resources online on how to perform mbs benchmarking, but I was unable to find anything. Could someone explain how to perform mbs benchmarking and provide some resources?
darkuss's user avatar
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1 vote
1 answer
294 views

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 ...
Jojo's user avatar
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1 vote
1 answer
93 views

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 ...
Shawn Zhang's user avatar
1 vote
1 answer
374 views

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 ...
Jojo's user avatar
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1 answer
87 views

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 ...
FixedIncomeprof's user avatar
1 vote
1 answer
145 views

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 ...
FixedIncomeprof's user avatar
1 vote
1 answer
481 views

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 ...
Jojo's user avatar
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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?
nsivakr's user avatar
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1 answer
209 views

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?
nsivakr's user avatar
  • 119
0 votes
1 answer
208 views

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 ...
Jojo's user avatar
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1 vote
1 answer
685 views

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 ...
mortgagequant's user avatar
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1 answer
45 views

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 ...
mon's user avatar
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1 answer
47 views

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 ...
mon's user avatar
  • 105
1 vote
0 answers
471 views

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 ...
VVKK77's user avatar
  • 149
2 votes
1 answer
743 views

Mortgage Backed Securities Settlement Date [closed]

How do settlement dates for non-TBA MBS work? Thanks, VVKK
VVKK77's user avatar
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1 answer
403 views

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 ...
Pythonista anonymous's user avatar
2 votes
0 answers
49 views

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 ...
jimart082's user avatar
-3 votes
1 answer
180 views

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 ...
paulgr's user avatar
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1 vote
3 answers
362 views

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 ...
A.L. Verminburger's user avatar
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1 answer
393 views

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 ...
Jojo's user avatar
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1 vote
1 answer
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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 ...
Jojo's user avatar
  • 895
1 vote
1 answer
102 views

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 ...
Jojo's user avatar
  • 895
2 votes
1 answer
281 views

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", "...
Jojo's user avatar
  • 895
0 votes
1 answer
546 views

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 ...
Silent_bliss's user avatar
0 votes
1 answer
136 views

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 ...
Silent_bliss's user avatar
1 vote
0 answers
80 views

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 ...
Chandramouli Raman's user avatar
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0 answers
172 views

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 ...
Jojo's user avatar
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0 votes
1 answer
98 views

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 ...
RandyF's user avatar
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2 votes
2 answers
678 views

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 ...
Skrrrrrtttt's user avatar
1 vote
2 answers
317 views

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 ...
Victor's user avatar
  • 519
1 vote
1 answer
226 views

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 ...
lrdbs's user avatar
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0 votes
0 answers
167 views

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 - ...
ThomasTheTank's user avatar
1 vote
1 answer
270 views

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?
user41439's user avatar
1 vote
0 answers
46 views

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 ...
Victor123's user avatar
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5 votes
1 answer
512 views

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 ...
Thomas Boyd's user avatar
1 vote
1 answer
57 views

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 ...
Lukas's user avatar
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1 vote
0 answers
42 views

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 ...
John's user avatar
  • 359
2 votes
1 answer
758 views

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 ...
santorch's user avatar
  • 115
1 vote
3 answers
167 views

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 ...
toing's user avatar
  • 233
-1 votes
1 answer
339 views

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 ...
JoeBass's user avatar
  • 103
2 votes
2 answers
898 views

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 ...
User's user avatar
  • 93
1 vote
2 answers
531 views

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.
User's user avatar
  • 93
0 votes
1 answer
132 views

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 ...
Jogi's user avatar
  • 103
4 votes
2 answers
4k views

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 ...
David McArthur's user avatar
-1 votes
1 answer
68 views

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 ...
Jack Armstrong's user avatar
0 votes
2 answers
255 views

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 ...
Azukei's user avatar
  • 1