Calculate the option cost for each tranche

Reference no: EM131781335

Question: An analysis of a CMO structure using the Monte Carlo method indicated the following, assuming 12% volatility:

a. Calculate the option cost for each tranche.

b. Which tranche is clearly too rich?

c. What would happen to the static spread for each tranche if a 15% volatility is assumed?

d. What would happen to the OAS for each tranche if a 15% volatility is assumed?

Reference no: EM131781335

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