Glenn M. Schultz

Investing in Mortgage-Backed and Asset-Backed Securities (eBook, ePUB)

Financial Modeling with R and Open Source Analytics

• Format: ePub

Produktbeschreibung

A complete guide to investing in and managing a portfolio of mortgage- and asset-backed securities Mortgage- and asset-backed securities are not as complex as they might seem. In fact, all of the information, financial models, and software needed to successfully invest in and manage a portfolio of these securities are available to the investment professional through open source software. Investing in Mortgage and Asset-Backed Securities + Website shows you how to achieve this goal. The book draws entirely on publicly available data and open source software to construct a complete analytic framework for investing in these securities. The analytic models used throughout the book either exist in the quantlib library, as an R package, or are programmed in R and incorporated into the analytic framework used. * Examines the valuation of fixed-income securities--metrics, valuation framework, and return analysis * Covers residential mortgage-backed securities--security cash flow, mortgage dollar roll, adjustable rate mortgages, and private label MBS * Discusses prepayment modeling and the valuation of mortgage credit * Presents mortgage-backed securities valuation techniques--pass-through valuation and interest rate models Engaging and informative, this book skillfully shows you how to build, rather than buy, models and proprietary analytical platforms that will allow you to invest in mortgage- and asset-backed securities.

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Produktdetails

• Verlag: John Wiley & Sons
• Seitenzahl: 416
• Erscheinungstermin: 19. Januar 2016
• Englisch
• ISBN-13: 9781119221500
• Artikelnr.: 44503850

Autorenporträt

GLENN M. SCHULTZ is the Director of mortgage analytics for Performance Trust Capital Partners. He co-edited (with Frank Fabozzi) Structured Products and Related Credit Derivatives (Wiley), as well as authored several chapters in the Handbook of MBS Securities and The Handbook of Fixed Income Securities.

Inhaltsangabe

Foreword iii

Acknowledgments v

Introduction ix

Preface xix

Part I Valuation of Fixed Income Securities 1

Chapter 1 The Time Value of Money 3

1.1 Present Value 4

1.2 Future Value 5

1.3 Present Value of an Annuity 6

1.4 Future Value of an Annuity 7

1.5 Solving Financial Questions with Present and Future Value 8

1.6 Application to Fixed Income Securities 9

Chapter 2 Theories of the Term Structure of Interest Rates 11

2.1 The Rational or Pure Expectations Hypothesis 13

2.2 The Market Segmentation Theory 17

2.3 The Liquidity Preference Theory 17

2.4 Modeling the Term Structure of Interest Rates 19

2.5 Application of Spot and Forward Rates 21

Chapter 3 Fixed Income Metrics 27

3.1 Maturity 28

3.2 Yield to Maturity 28

3.3 Weighted Average Life 34

3.4 Duration 36

3.4.1 Macaulay Duration 37

3.4.2 Modified Duration 39

3.5 Convexity 42

3.6 Fisher-Weil Duration and Convexity 45

3.7 Effective Duration 51

3.8 Effective Convexity 53

3.9 Summing the Aforementioned Measures of Duration and Convexity 54

3.10 Key Rate Duration 55

Chapter 4 The Valuation of Fixed Income Securities 59

4.1 A Valuation Framework for Fixed Income Securities 60

4.2 Application of the Framework to Structured Securities 61

4.3 Twist and Shift: Characterizing Changes in the Level, Steepness, and Curvature of the Term Structure 63

4.4 Case Study: 4.00% 30-year MBS 65

4.5 Scenario Comparative Analysis 74

Chapter 5 Fixed Income Return Analysis 77

5.1 Return Strategies 78

5.2 The Components of Return 80

5.3 The Buy and Hold Strategy 80

5.4 Total and Absolute Returns 83

5.5 Deconstructing the Fixed Income Return Profile 84

5.6 Estimating Bond Returns with Price and Risk Measures 86

Part II Residential Mortgage Backed Securities 89

Chapter 6 Understanding Mortgage Lending and Loans 91

6.1 Classification of Real Estate 92

6.2 Residential Mortgage Loan Amortization 100

6.3 Deconstructing the Amortization Table 103

6.4 Mortgage Servicing 104

Chapter 7 Modeling Cash Flows 107

7.1 Prepayment Conventions 108

7.2 Modeling MBS Cash Flows 111

7.2.1 0% PPC Assumption - No Prepayment 112

Chapter 8 Mortgage Prepayment Analysis 117

8.1 Big Data - What is it? 118

8.2 The Statistical Learner 118

8.3 Survival Analysis 120

8.4 The Cox Proportional Hazards Model 125

8.5 Data Types 127

8.6 Case Study: FHLMC 30-yr Loan Level Prepayment Analysis 128

8.7 Survival Analysis - Modeling Loan Cohorts 139

Chapter 9 The Predictive Prepayment Model 145

9.1 Turnover 147

9.2 Loan Seasoning 147

9.3 Seasonality 149

9.4 Borrower Incentive to Refinance 150

9.5 Borrower Burnout 153

9.6 Application of the Prepayment Model 162

Part III Valuation of Mortgage Backed Securities 167

Chapter 10 Mortgage Dollar Roll 169

10.1 Evaluating the Dollar Roll 171

10.2 Risk Associated with the Dollar Roll 179

Chapter 11 Relative Value Analysis 183

11.1 Liquidity 184

11.2 Static Cash Flow Analysis 185

11.3 Return Analysis 189

Chapter 12 Option Adjusted Spread Analysis 197

12.1 Numerical Methods of Modern Financial Theory 199