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Unformatted text preview: 12L Which of the following is NOT a shortcoming
a mortgage or assetbacked security?
A_ The mongage or assetbacked 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 optionadjusted
 spread ~
•. 3. An assetbacked security (ABS) backed by automobile loans is issued. This security should be evaluated
using the:
A. nominal spread.
B. zerovolatility spread (Zspread).
C. optionadjusted
spread (OAS) from the binomial model.
D. optionadjusted
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. zerovolatility spread (Z~pread).
C. optionadjusted
spread (OAS) from the binomial model.
D. optionadjusted
spread from Monte Carlo simulation.
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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.
 Spring '12
 india

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