Homework Chapter 12 - 12L Which of the following is NOT a...

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Unformatted text preview: 12L Which of the following is NOT a shortcoming a mortgage or asset-backed security? A_ The mongage or asset-backed securities - Ii _ -II, •• _--- of the cash flow yield as a process for the cash flow analysis of are assum'ed to be held to the final payoU( based on some ,) prepayment assurnprion. B. All cash flows are assumed to be reinvested at the cash flow yield. C. All cash flows are assumed (0 be certain to occur. D. The term structure is assumed (0 be normal. 2. ,/ Brian Heltzel recently completed a Monte Carlo simulation analysis of a collateralized mortgage obligation (CMO) tranche. Heltzel's analysis includes six equallyweighted paths. with the present value of each calculated using four different discount rates. . as shown in thefollowing figure. ~ ; . Representativ« Path PVifsprud is 50 basis points PV ifsprcad is 60 basis points PV ifJprclld is 70 basis pqints PVifspr~ad is 75 basis point« 65 I 70 68 66 2 73 70 68 66 63 3 68 66 64 4 71 69 68 67 5 77 75 73 71 6 75 73 7I 70 The actual market price of the CMO tranche (OAS) is closest to: A- _50 basis points. B. 60 basis points. C. 70 basis points. D. 75 basis points. -s being valued is 70.17. The tran~hes option-adjusted -- spread ~ •. 3. An asset-backed security (ABS) backed by automobile loans is issued. This security should be evaluated using the: A. nominal spread. B. zero-volatility spread (Z-spread). C. option-adjusted spread (OAS) from the binomial model. D. option-adjusted spread from Monte Carlo simulation. _ 4. A Ginnie Mae pool of mortgages with no call or put features is issued. This security should be evaluated using the: A. nominal spread. B. zero-volatility spread (Z-~pread). C. option-adjusted spread (OAS) from the binomial model. D. option-adjusted spread from Monte Carlo simulation. .:~ -\ ")' J 'i ... -=~,- ...
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This note was uploaded on 04/04/2012 for the course ECON 313 taught by Professor India during the Spring '12 term at University of San Francisco.

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