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l2 48 mortgage-backed sector of the bond market

This class was created by Brainscape user Steven Popovic. Visit their profile to learn more about the creator.

By: Steven Popovic
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Decks in this class (13)

a describe a mortgage loan, and explain the cash flow characteristics of a fixed-rate, level payment, and fully amortized mortgage loan;
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b explain investment characteristics, payment characteristics, and risks of mortgage passthrough securities;
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c calculate the prepayment amount on a mortgage passthrough security for a month, given the single monthly mortality rate;
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d compare the conditional prepayment rate (CPR) with the Public Securities Association (PSA) prepayment benchmark;
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e explain why the average life of a mortgage-backed security is more relevant than the security’s maturity;
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f explain factors that affect prepayments and the types of prepayment risks;
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g explain how a collateralized mortgage obligation (CMO) is created and how it provides a better matching of assets and liabilities for institutional investors;
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h distinguish among the sequential pay tranche, the accrual tranche, the planned amortization class tranche, and the support tranche in a CMO;
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i evaluate the risk characteristics and relative performance of each type of CMO tranche, given changes in the interest rate environment;
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j explain investment characteristics of stripped mortgage-backed securities;
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k compare agency and nonagency mortgage-backed securities;
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l compare credit risk analysis of commercial and residential nonagency mortgage-backed securities;
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m describe the basic structure of a commercial mortgage-backed security (CMBS) and explain the ways in which a CMBS investor may realize call protection at the loan level and by means of the CMBS structure.
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l2 48 mortgage-backed sector of the bond market

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