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Determining the efficiency of the GNMA mortgage-backed securities market /Clark, Charles A., January 1994 (has links)
Thesis (M.A.)--Virginia Polytechnic Institute and State University, 1994. / Vita. Abstract. Includes bibliographical references (leaves 109-121). Also available via the Internet.
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The impact of basis risk on the hedging of mortgage-backed securities with US treasury futuresLavelle, Andrew L. 01 January 1999 (has links)
Mortgage-backed securities (MBS) are similar to traditional fixed-income securities in that they are exposed to interest rate risk. Interest rate risk involves potential losses in value stemming from unfavorable movements of interest rates. There are standard practices that allow investors to measure interest rate exposure and manage this risk by hedging, or reducing the risk, with positions in financial derivative securities. Interest rate hedges do not always work perfectly because of basis risk. Basis risk arises because the movement in an asset's price (MBS) is not perfectly correlated with the movement of the price of the derivatives (Treasury futures) used to hedge interest rate risk. The paper hypothesizes that despite the presence of basis risk, a dynamic hedging strategy using US Treasury futures makes a good hedge for MBS price fluctuations caused by interest rates. Empirical tests reject this hypothesis.
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Valuation of Mortgage Backed Securities with Prepayment using BDT Model and Monte Carlo MethodsTang, Yuxiao 30 April 2015 (has links)
Mortgage backed securities are one of the most important asset classes available to fixed income investors. They are also essential to the functioning of the financial and housing market by providing liquidity to the home mortgage market. Proliferation and wide spread acceptance of mortgage backed securities resulted in a significant deduction of the interest rates for home mortgages. The 2007-2010 financial crisis sparked enhanced scrutiny of the accuracy of the pricing of mortgage backed securities. The purpose of the present thesis is to develop a computer based mathematical methodology to accurately price individual mortgages that are the fundamental assets underlying every mortgage backed security. The focus of this paper is to correctly account for inherent interest rate and prepayment risk. Default risk is not subject of this project. Interest rate risk is handled in the framework of the arbitrage free Black-Derman-Toy (BDT) model. Public Securities Association’s (PSA) model is used to simulate prepayment risk. Monte Carlo simulation methodology is developed to evaluate the properly discounted current value of the risky cash flows and hence value the mortgages. The computational algorithms are implemented in R.
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Option theory for mortgages and mortgage-backed securities. / CUHK electronic theses & dissertations collection / Digital dissertation consortium / ProQuest dissertations and thesesJanuary 2003 (has links)
Another achievement of this research is to elaborate the modified concept of Cash Rebate Mortgages. To examine the difference between Cash Rebate Mortgages and standard mortgages, we have built a simulation model to study the behavior of these two types of mortgages. The results indicate that the value of Cash Rebate Mortgages is higher than that of standard mortgages, but is more sensitive to embedded options. If the probability of exercising an option is higher, then the value of Cash Rebate Mortgages will drop at a faster rate than that of standard mortgages. / Several findings are elaborated in this dissertation. Our model has identified the major contributors to mortgage prepayment, and has developed a logistic regression model to describe prepayment behavior. We further illustrate that prepayment and default behavior are associated with financial reasons: the value of the refinancing incentive is usually greater than the prepayment penalty plus the transaction cost for refinancing mortgages, and the outstanding balance of the mortgage is higher than the current market value of the underlying property minus the transaction cost. / The final objective of this dissertation is to develop an option model for MBS issuers. Most previous studies that have developed MBS models have focused on investors, but the model that is presented here is specifically for MBS issuers. The current study develops a risk management tool for issuers and guarantors to monitor their MBS portfolios. The model projects the cash inflow of mortgages and the cash outflow to MBS, alters the traditional model by introducing decision trees, and uses a simulation program with multiple path generation to develop a model for issuers to manage their MBS portfolios. According to the results of the model, issuers can manage the risk level of their portfolios by determining the Collection Account Balance, the Overcollateralization Ratio, the Net Residual Value, and the Liquidity Advance. Finally this paper also provides suggestions on risk management for MBS issuers. / The objective of this dissertation is to develop an option model for residential mortgages and Mortgage-Backed Securities. Previous studies in the literature have identified several research opportunities that have not yet been explored. The current study attempts to fill the research gap, by altering the traditional model of mortgage valuation with a trinomial tree. We combine the prepayment, delinquency, default, and recovery of delinquency into a single model, to build a simulation program to generate different cash flow scenarios. The industrial data of the Korea Mortgage Corporation and a medium sized Hong Kong bank are used as empirical evidence for the model. / by Yat-ming Lam. / "February 2003." / Source: Dissertation Abstracts International, Volume: 64-09, Section: A, page: 3408. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2003. / Includes bibliographical references (p. [222-235]). / Available also through the Internet via Current research @ Chinese University of Hong Kong under title: Option theory for mortgages and mortgage-backed securities (Korea, China) / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / School code: 1307.
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Asset securitization. Mortgage pass Through-Products,and Relative ProblemsChen, Hui 28 August 2003 (has links)
none
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Pricing of mortgage-backed securities via genetic programming黃瑞斌, Wong, Sui-pan, Ben. January 2001 (has links)
published_or_final_version / Statistics and Actuarial Science / Master / Master of Philosophy
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Determining the efficiency of the GNMA mortgage-backed securities marketClark, Charles A. 04 December 2009 (has links)
This paper is an evaluation of the efficiency of the Government National Mortgage Association (GNMA) mortgage-backed securities market. GNMA securities represent a $702 billion market. Despite this size, the securities do not trade on an organized exchange. Trading on an organized exchange implies that a maximum amount of available information is incorporated into prices. Consequently, can the GNMA market be efficient?
An efficient market, as posited by Eugene Fama and others, is one where all of the information available in a market is incorporated in the prices in that market. There are various levels of efficiency ranging from the use of all publicly available information to the use of that information plus information not generally available (i.e. proprietary and "insider" information".) This paper considers the more general case of information available in period t not being used in that period but rather being incorporated in the prices of period t+n.
The analysis uses monte carlo simulation to generate paths of discount rates based on the yield curve for U.S. Treasury securities. These periodic rates along with a common spread are used to discount the estimated cash flows on the GNMA securities. The common spread is termed the Option Adjusted Spread ("OAS") and is postulated to incorporate all of the market information over and above that is used in setting prices (and their corollary, yields) in the Treasury market.
The test of market efficiency is whether or not the prices in period t are correlated with the OAS of a subsequent period. / Master of Arts
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The prospect of mortgage backed security in Hong Kong.January 1999 (has links)
by Lo Chi Wai. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaves 54). / ABSTRACT --- p.II / TABLE OF CONTENTS --- p.III / LIST OF TABLES/CHARTS --- p.VI / PREFACE --- p.VI / Chapter / Chapter I. --- INTRODUCTION --- p.1 / INTRODUCTION --- p.1 / Structure of the Paper --- p.2 / Chapter II. --- HONG KONG PROPERTY MARKET --- p.3 / The Property Market during 1990's --- p.3 / Supply of Residential Property --- p.4 / The future property price --- p.4 / Mortgage Pool --- p.7 / Chapter III --- MORTGAGE CORPORATION --- p.10 / The Player in Securitization --- p.10 / Mortgage Corporation in U.S --- p.10 / The different between U.S. situation and Hong Kong situation --- p.11 / HONG KONG MORTGAGE CORPORATION --- p.12 / HKMC's share in the residential mortgage market --- p.13 / HKMC's mortgage portfolio --- p.13 / HKMC's Benefit --- p.13 / Originator's and investor's Perspective --- p.16 / Chapter IV. --- THE PROGRESS OF HKMC --- p.20 / Fixed rate mortgage Pilot Scheme --- p.20 / The debt program --- p.21 / Mortgage Guarantee Scheme --- p.23 / Chapter V. --- DIFFICULT OF MBS PRICING --- p.27 / RISK --- p.28 / The Financial institution might find MBS unattractive? --- p.34 / Chapter VI. --- PROSPECT --- p.35 / Fully-fledged credit reference agency --- p.35 / Fixed rate Mortgage promotion --- p.35 / US dollar/Hong Kong dollar Swap --- p.36 / Mortgage lending rate war --- p.36 / Debt Market --- p.37 / Standardization --- p.37 / Credit Rating --- p.38 / Don't let the history repeat itself --- p.38 / CONCLUSION --- p.39 / APPENDIX --- p.40 / BIBLIOGRAPHY --- p.54
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Risk Measurement of Mortgage-Backed Security Portfolios via Principal Components and Regression AnalysesMotyka, Matt 29 April 2003 (has links)
Risk measurement of mortgage-backed security portfolios presents a very involved task for analysts and portfolio managers of such investments. A strong predictive econometric model that can account for the variability of these securities in the future would prove a very useful tool for anyone in this financial market sector due to the difficulty of evaluating the risk of mortgage cash flows and prepayment options at the same time. This project presents two linear regression methods that attempt to explain the risk within these portfolios. The first study involves a principal components analysis on absolute changes in market data to form new sets of uncorrelated variables based on the variability of original data. These principal components then serve as the predictor variables in a principal components regression, where the response variables are the day-to-day changes in the net asset values of three agency mortgage-backed security mutual funds. The independence of each principal component would allow an analyst to reduce the number of observable sets in capturing the risk of these portfolios of fixed income instruments. The second idea revolves around a simple ordinary least squares regression of the three mortgage funds on the sets of the changes in original daily, weekly and monthly variables. While the correlation among such predictor variables may be very high, the simplicity of utilizing observable market variables is a clear advantage. The goal of either method was to capture the largest amount of variance in the mortgage-backed portfolios through these econometric models. The main purpose was to reduce the residual variance to less than 10 percent, or to produce at least 90 percent explanatory power of the original fund variances. The remaining risk could then be attributed to the nonlinear dependence in the changes in these net asset values on the explanatory variables. The primary cause of this nonlinearity is due to the prepayment put option inherent in these securities.
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Mortgage corporation--: the poison or medicine to Hong Kong economy?.January 1999 (has links)
by Cheng Lok-Man. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaf 106). / ABSTRACT / TABLE OF CONTENTS / LIST OF ILLUSTRATIONS / LIST OF TABLES / Chapter / Chapter I. --- INTRODUCTION / Chapter 1. --- Introduction --- p.1 / Chapter 2. --- Methodology --- p.2 / Chapter 3. --- Source of Information --- p.3 / Chapter 4. --- Structure of the paper --- p.4 / Chapter II. --- THE EMERGENCE OF NEW VEHICLE ~HONG KONG MORTGAGE CORPORATION / Chapter 1. --- History --- p.6 / Chapter 1. --- Reasons for the Property Boom (1990-1994) --- p.6 / Chapter a. --- Diminishing Real Interest Rate --- p.6 / Chapter b. --- Demand- Supply Mechanism --- p.6 / Chapter c. --- Chinese Economy and Psychological Effect --- p.6 / Chapter 2. --- Loan mix of the Banking Sector --- p.7 / Chapter 3. --- Mortgage War --- p.7 / Chapter 2. --- Framework of HKMC --- p.8 / Chapter 3. --- Mechanism of HKMC --- p.9 / Chapter 4. --- Phenomenon of the Mortgage Market in Hong Kong --- p.10 / Chapter III. --- MORTGAGE CORPORATION: THE WHOLE PICTURE / Chapter 1. --- Benefits of Hong Kong Mortgage Corporation --- p.13 / Chapter 1. --- Contribution to Home Financing --- p.13 / Chapter 2. --- Banking Stability --- p.14 / Chapter 3. --- Monetary Stability --- p.15 / Chapter 4. --- Development of Debt Market --- p.16 / Chapter 2. --- "Mortgage market in United States, Canada & Hong Kong" --- p.16 / Chapter 1. --- Hong Kong --- p.17 / Chapter 2. --- United States --- p.17 / Chapter 3. --- Canada --- p.18 / Chapter 3. --- Limitation of Hong Kong Mortgage Corporation --- p.19 / Chapter 1. --- Banks are not urgent to sell the mortgages --- p.19 / Chapter a. --- The Attitudes of Local Banks --- p.20 / Chapter b. --- The Attitudes of Foreign Banks --- p.21 / Chapter 2. --- Limit Capital Base --- p.22 / Chapter 3. --- The Issue of Fixed Rate Mortgages --- p.22 / Chapter 4. --- Practical Problems of Mortgage Corporation --- p.23 / Chapter 1. --- Differential Attitudes of HKMC & Banking Sector --- p.23 / Chapter 2. --- Unclear Attitudes of the Parties that related to HKMC: Are they helpers or the enemies? --- p.25 / Chapter a. --- Investors --- p.25 / Chapter b. --- Credit Rating Agency --- p.26 / Chapter c. --- Insurance Companies --- p.26 / Chapter 3. --- Over Optimistic of Risk Management --- p.27 / Chapter a. --- Risk arising from Operation --- p.27 / Chapter 1. --- Credit Risk --- p.27 / Chapter 2. --- Interest Rate Risk --- p.28 / Chapter 3. --- Prepayment Risk --- p.29 / Chapter 4. --- Operational Risk --- p.30 / Chapter b. --- Risks arising from issuing of Mortgages Backed Securities --- p.30 / Chapter 1. --- Delivery Risk --- p.31 / Chapter 2. --- Interest Rate Risk --- p.32 / Chapter 3. --- Issue in the pricing of mortgage backed securities --- p.32 / Chapter IV. --- PERFORMANCE OF THE MORTGAGE MARKET AND HKMC AFTER SET UP / Chapter 1. --- Pilot Scheme of Fixed Rate Mortgage in Hong Kong --- p.33 / Chapter 2. --- Relaxation and Simplification of mortgage loan criteria --- p.35 / Chapter 1. --- Simplification of the purchase of mortgage loans --- p.35 / Chapter 2. --- Relaxation of the criteria of the mortgage loans accepted by HKMC --- p.36 / Chapter 3. --- Debt Issuance Activities --- p.37 / Chapter 1. --- Note Issuance Programme (NIP) --- p.37 / Chapter 2. --- Debt Issuance Programme (DIP) --- p.38 / Chapter 4. --- Forward Commitment Facility --- p.39 / Chapter 5. --- Mortgage Guarantee Scheme --- p.40 / Chapter 6. --- Board of Director --- p.43 / Chapter 7. --- Performance of mortgage market --- p.44 / Chapter V. --- THE REACTION TOWARDS THE POWERFUL VEHICLE / Chapter 1. --- Banking Sector --- p.46 / Chapter 2. --- Home Buyers --- p.46 / Chapter 3. --- Property Developers --- p.49 / Chapter 4. --- Insurance Companies --- p.50 / Chapter 5. --- Hong Kong Monetary Authority and Hong Kong Mortgage Corporation --- p.50 / Chapter VI. --- RECOMMENDATION & CONCLUSION / Chapter 1. --- Recommendation --- p.53 / Chapter 1. --- "Setting of the Fixed Adjustable Rate of Mortgage (""FARM"")" --- p.53 / Chapter 2. --- Ways of Promoting the Debt Securities --- p.54 / Chapter 3. --- The Issue of Mortgage-Backed Securities (MBS) in the second stage of development --- p.55 / Chapter 4. --- Option in Debt Papers in US Dollars Denomination --- p.57 / Chapter 5. --- Clarification of the Top-up Loan Arrangement --- p.57 / Chapter 2. --- Conclusion --- p.58 / Chapter 3. --- Last Word --- p.59 / APPENDIX --- p.60 / BIBLIOGRAPHY --- p.106
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