Create dollar roll matrix of breakeven rates

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Reference no: EM131334299

Create a dollar roll matrix of breakeven rates for an agency MBS with gross and deal coupons of 8.035% and 7.5%, respectively, and settlement dates 6/14/16 and 9/15/16. Assume standard fully amortizing fixed rate mortgages with a term of 30:0, a WAM of 29:5 and an immediate price of 96-16. MBS CF’s are due the owner of record on the first of each month, but are paid on the 25^th of that month.

In the hardcopy you send in, you MUST show the analysis for a PSA of 150, a forward drop of 35/32, and a reinvestment rate of 2% (act/360).

Calculate breakeven rates for PSAs of 120, 150, and 180, and forward drops of -40, -35, and -30 (32’s).

(b) Discuss the risks of roll vs. hold from the perspective of the investor.

Reference no: EM131334299

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Create dollar roll matrix of breakeven rates : Create a dollar roll matrix of breakeven rates for an agency MBS with gross and deal coupons of 8.035% and 7.5%, respectively, and settlement dates 6/14/16 and 9/15/16. Calculate breakeven rates for PSAs of 120, 150, and 180, and forward drops of -40..

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