Can anybody give glance on RMBS and CMBS types of Stuctured products, i have confusion on Prepayment risk...... Do the RMBS carry high prepayment risk than CMBS. your input is really appreciate!!!!!!
Best regards,
Bhavesh Soni作者: defour44 时间: 2011-7-11 19:06
Not sure what your book says but commercial mortgages are usually floating rate and residential mortgages are usually fixed rate. That means that interest rate fluctuations cause more prepayments for residential mortgages than commercial mortgages. But, in general, I would say that it's not a particularly relevant comparison because what really matters is the characteristics of the security you own, not the prepayments for this humongous class of securities.作者: bolligerallstar 时间: 2011-7-11 19:06
and don't forget how they have tranched the risk, what tranche you are buying into, and how much the support tranches have already been impacted by prepayments and or defaults.作者: zephyranalyst 时间: 2011-7-11 19:06
Also, CMBS are non-recourse loans and have various prepayment safe guards like defeasence and some others cant remember them off the top of my head.作者: xilinx_altera 时间: 2011-7-11 19:06
RMBS has higher prepayment risk than CMBS due to limited prepay penalties. Every time interest rates drop, prime homeowners generally refi. CMBS refi is generally very limited. CFAKid has it right.
