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

Book Description

An in-depth look at the latest innovations in mortgage-backed securities

The largest sector of the fixed-income market is the mortgage market. Understanding this market is critical for portfolio managers, as well as issuers who must be familiar with how these securities are structured. Mortgage-Backed Securities is a timely guide to the investment characteristics, creation, and analysis of residential real estate-backed securities. Each chapter contains cutting-edge information for investors, traders, and other professionals involved in this market, including discussions of structuring mortgage products-such as agency CMOs and new types of mortgages-and an in-depth explanation of the concept of option-adjusted spreads and other analytical concepts used to assess relative value.

Table of Contents

  1. THE FRANK J. FABOZZI SERIES
  2. Title Page
  3. Copyright Page
  4. Dedication
  5. Preface
  6. About the Authors
  7. PART One - Introduction to Mortgage and MBS Markets
    1. CHAPTER 1 - Overview of Mortgages and the Consumer Mortgage Market
      1. OVERVIEW OF MORTGAGES
      2. MORTGAGE LOAN MECHANICS
      3. RISKS ASSOCIATED WITH MORTGAGES AND MORTGAGE PRODUCTS
    2. CHAPTER 2 - Overview of the Mortgage-Backed Securities Market
      1. CREATING DIFFERENT TYPES OF MBS
      2. MBS TRADING
      3. THE ROLE OF THE MBS MARKETS IN GENERATING CONSUMER LENDING RATES
      4. CASH FLOW STRUCTURING
  8. PART Two - Prepayment and Default Metrics and Behavior
    1. CHAPTER 3 - Measurement of Prepayments and Defaults
      1. PREPAYMENT CONVENTION TERMINOLOGY
      2. DELINQUENCY, DEFAULT, AND LOSS TERMINOLOGY
    2. CHAPTER 4 - Prepayment Behavior and Performance
      1. PREPAYMENT BEHAVIOR
      2. DRIVERS OF PREPAYMENT ACTIVITY
      3. ADDITIONAL FACTORS AFFECTING PREPAYMENT SPEEDS
      4. PREPAYMENT BEHAVIOR OF “NONFIXED-PAYMENT” PRODUCTS
      5. SUMMARY
  9. PART Three - Structuring
    1. CHAPTER 5 - Introduction to MBS Structuring Techniques
      1. UNDERLYING LOGIC IN STRUCTURING CASH FLOWS
      2. STRUCTURING DIFFERENT MORTGAGE PRODUCTS
      3. FUNDAMENTALS OF STRUCTURING CMOs
    2. CHAPTER 6 - Fundamental MBS Structuring Techniques: Divisions of Principal
      1. TIME TRANCHING
      2. PLANNED AMORTIZATION CLASSES (PACS) AND THE PAC/SUPPORT STRUCTURE
      3. TARGETED AMORTIZATION CLASS BONDS
      4. Z-BONDS AND ACCRETION-DIRECTED TRANCHES
      5. A SIMPLE STRUCTURING EXAMPLE
    3. CHAPTER 7 - Fundamental MBS Structuring Techniques: Divisions of Interest
      1. COUPON STRIPPING AND BOOSTING
      2. FLOATER/INVERSE FLOATER COMBINATIONS
      3. TWO-TIERED INDEX BONDS (TTIBS)
      4. EXCESS SERVICING IOs
    4. CHAPTER 8 - Structuring Private Label CMOs
      1. PRIVATE LABEL CREDIT ENHANCEMENT
      2. PRIVATE LABEL SENIOR STRUCTURING VARIATIONS
    5. CHAPTER 9 - The Structuring of Mortgage ABS Deals
      1. FUNDAMENTALS OF ABS STRUCTURES
      2. CREDIT ENHANCEMENT FOR MORTGAGE ABS DEALS
      3. FACTORS INFLUENCING THE CREDIT STRUCTURE OF DEALS
      4. ADDITIONAL STRUCTURING ISSUES AND DEVELOPMENTS
  10. PART Four - Valuation and Analysis
    1. CHAPTER 10 - Techniques for Valuing MBS
      1. STATIC CASH FLOW YIELD ANALYSIS
      2. ZERO-VOLATILITY SPREAD
      3. VALUATION USING MONTE CARLO SIMULATION AND OAS ANALYSIS
      4. TOTAL RETURN ANALYSIS
    2. CHAPTER 11 - Measuring MBS Interest Rate Risk
      1. DURATION
      2. CONVEXITY
      3. YIELD CURVE RISK
      4. OTHER RISK MEASURES
      5. ILLUSTRATION OF RISK MEASURES
      6. SUMMARY
    3. CHAPTER 12 - Evaluating Senior MBS and CMOs
      1. YIELD AND SPREAD MATRICES
      2. MONTE CARLO AND OAS ANALYSIS
      3. TOTAL RETURN ANALYSIS
      4. COMPARING THE ANALYSIS OF AGENCY AND PRIVATE LABEL TRANCHES
      5. EVALUATING INVERSE FLOATERS
      6. SUMMARY
  11. APPENDIX - An Option-Theoretic Approach to Valuing MBS
  12. Index