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标题: Reading 57: Valuing Mortgage-Backed and Asset-Backed Securit [打印本页]

作者: 土豆妮 时间: 2010-4-21 14:13 标题: [2010]Session 15-Reading 57: Valuing Mortgage-Backed and Asset-Backed Securit

Session 15: Fixed Income: Structured Securities
Reading 57: Valuing Mortgage-Backed and Asset-Backed Securities

LOS a, (Part 2): Illustrate the computation, use, and limitations of the nominal spread and zero-volatility spread for a mortgage-backed security (MBS) and an asset-backed security (ABS).

The difference between the cash flow yield on a mortgage-backed security (MBS) and the yield on a Treasury with a maturity equal to the average life of the MBS is called the:

A)
nominal spread.

B)
zero-volatility spread.

C)
Z-spread.

The difference between the cash flow yield on an MBS and the yield on a Treasury with a maturity equal to the average life of the MBS is called the nominal spread.

作者: 土豆妮 时间: 2010-4-21 14:13

Which of the following is a limitation of the zero-volatility spread for a mortgage-backed security (MBS)? The zero-volatility spread:

A)
does not account for the fact that MBSs have higher convexity than Treasuries.

B)
is not adjusted for prepayment risk.

C)
is not adjusted for interest rate risk.

The zero-volatility spread (also known as the Z-spread or static spread) is the spread that must be added to Treasury spot rates that will cause the discounted value of the cash flows for an MBS or asset-backed security (ABS) to equal its price, assuming that the security is held until maturity. The chief drawback of the Z-spread is that it is not adjusted for prepayments risk.

作者: 土豆妮 时间: 2010-4-21 14:15

Which of the following is a limitation of the nominal spread for a mortgage-backed security? The nominal spread:

A)
is not adjusted for interest rate risk.

B)
does not account for the fact that mortgage-backed securities have higher convexity than Treasuries.

C)
is not adjusted for prepayment risk.

The nominal spread masks the fact that a portion of it is solely compensation for accepting the prepayment risk of the MBS.

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