A complete guide to investing in and managing a portfolio of mortgage- and asset-backed securities
Mortgage- and asset-backed securities are not as complex as they might seem. In fact, all of the information, financial models, and software needed to successfully invest in and manage a portfolio of these securities are available to the investment professional through open source software. Investing in Mortgage and Asset-Backed Securities + Website shows you how to achieve this goal.
The book draws entirely on publicly available data and open source software to construct a complete analytic framework for investing in these securities. The analytic models used throughout the book either exist in the quantlib library, as an R package, or are programmed in R and incorporated into the analytic framework used.
Examines the valuation of fixed-income securitiesāmetrics, valuation framework, and return analysis
Covers residential mortgage-backed securitiesāsecurity cash flow, mortgage dollar roll, adjustable rate mortgages, and private label MBS
Discusses prepayment modeling and the valuation of mortgage credit
Presents mortgage-backed securities valuation techniquesāpass-through valuation and interest rate models
Engaging and informative, this book skillfully shows you how to build, rather than buy, models and proprietary analytical platforms that will allow you to invest in mortgage- and asset-backed securities.
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Yes, you can access Investing in Mortgage-Backed and Asset-Backed Securities by Glenn M. Schultz in PDF and/or ePUB format, as well as other popular books in Negocios y empresa & Inversiones y valores. We have over one million books available in our catalogue for you to explore.
The chief value of money lies in the fact that one lives in a world in which it is overestimated.
H.L. Mencken (1707ā1754)
Chapter 1 outlines the foundation for successful investing irrespective of the asset class under consideration. Namely, the chapter introduces the reader to the concept of the time value of money. Understanding the time value of money is essential for successful investing for the following reasons:
It allows the investor to measure the value of one asset or portfolio of cash flows relative to another.
The investor, using the time value of money, can estimate expected holding period returns.
1.1 Present Value
Congratulations! You have won $1 million in the āChances Are Slim Lottery.ā (They were very slim, but you played anyway, and got lucky.) You now have a choice, either take a lump sum payment of $500,000 or monthly payments of $2,777.78 per month over the next 30 years.
This is a classic time-value-of-money problem. The time value of money postulates that it is preferable to receive a dollar today rather than the same dollar in the future. This is because the dollar received today will have a certain purchasing power over the dollar received in the future.
For example, the dollar received today may be invested in an interest bearing account that will grow over time. Alternatively, one may spend the dollar received today rather than deferring consumption. Either way, one is better off taking the dollar today than at a later date. The winning lottery problem implies an interest rate: What can be earned on the $500,000 taken today as well as an inflation outlook, or what is the purchasing power of a dollar received at some point in the future?
To answer the winning lottery question we first must understand the concept of present value. The present value (PV) equation 1.1 allows a person to determine the value today of a dollar received at some point in the future:
1.1
where
=
Interest rate
=
Number of periods
Equation 1.1 states, that given a discount or interest rate (i) and time or number of discounting per...
Table of contents
Cover
Series Page
Title Page
Copyright
Table of Contents
Dedication
Foreword
Preface
Acknowledgments
Introduction
Part One: Valuation of Fixed-Income Securities
Part Two: Residential Mortgage-Backed Securities
Part Three: Valuation of Mortgage-Backed Securities
