Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
A cash-flow yield is the discount rate that makes the price of a mortgage-backed or asset-backed security equal to the present value of its cash flows. It is built on three assumptions: i) assumption regarding prepayment and default recovery ii) assuming that the cash flows would be reinvested at the computed cash flow yield, and iii) the assumption that the security will be held by the investor until maturity. These three assumptions can also be considered as major drawbacks of this model.
The zero-volatility spread is a measure of the spread that the investor would realize over the entire Treasury spot rate curve if a mortgage-backed or asset-backed security is held to maturity.
The cash flows of mortgage-backed and asset-backed securities are interest rate path dependent; because of this feature, Monte Carlo method is used for valuing these securities instead of binomial model. Monte Carlo simulation is used for valuing mortgage-backed securities, while on-the-run treasury is used for valuing asset-backed securities. The simulation works by generating many scenarios of future interest rate paths. For each month, a monthly interest rate and a mortgage refinancing rate are generated. The monthly interest rates are used for discounting the projected cash flows and the mortgage refinancing rate is used for determining the cash flow because it represents the opportunity cost for the mortgagor.
A few duration measures that are used for mortgage-backed and asset-backed securities are effective duration, cash flow duration, coupon rate duration and empirical duration.
Basically, an asset-backed security can have one of the following three characteristics. (Characteristic a) No prepayment option. Example: security backed by credit card receivables. (Characteristic b) Prepayment option is available but borrowers do not show any intention of prepaying when refinancing rates fall below the loan rate. Example: security backed by automobile loans. (Characteristic c) Prepayment option is available and borrowers are willing to prepay when refinancing rates fall below the loan rate. Example: closed-end home equity loans taken by high quality borrowers.
Explain about the equity claims in the financial security. Equity classifies claims to shares into the net income and assets of a firm, and they do not contain a maturity date.
Permanent and Temporary Working Capital, I am looking for assignment help on the topic Permanent and Temporary Working Capital. It would be great if anyone help me.
Give two examples of types of companies that would be best able to handle high debt levels. Companies that manage local telephone service and those that manage natural gas deli
Explain why accounting profits and cash flows are not the same thing. Stock worth depends on future cash flows, their riskiness and their timing. Profit calculations don't con
Forward Contracts: The origin of forward contracts is lost in history. Some authors suggest that, it was India where these contracts took birth, while some others suggest that
(a) Prior to FAS 133 if companies qualified for hedge accounting their hedges were assumed to be perfect-no valuation or testing required. Currently under FAS 133 risk managers se
Rate of return of a Bond In case of bonds, rather than dividends, investor is entitled to payments of interest yearly or semi-annually. Investor also benefits if there is an ap
Describe the balance of payments identity and discuss its implications under the fixed and flexible exchange rate regimes. Answer: The balance of payments recognize holds that t
What are the benefits of “paying late” (but not too late) and how do companies attempt to do this? Since money has time value, the later cash is paid, but not as well late, the b
Why do total assets equal the sum of total liabilities and equity? Explain. Assets = Liabilities + Equity Assets are the items of value that a business owns. Liabilities ar
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd