Valuation Methods of Collateralized mortgage obligations Dissertation

Valuation Methods of Collateralized mortgage obligations - Dissertation Exampleted For Research Study 55 entropy Analysis 57 Data Analysis Technique 57 Appropriateness of data analysis technique 59 Description on fountainheadnaire Formulation 61 Findings of the Research (CMO Valuation Model) 62 Reliability on the Data 62 Chapter Summary 63 Chapter Four Methods 64 institution 64 Research Method 64 Research blueprint 66 Population and Sample 67 Sampling and Sampling Technique 67 Research Instrument 68 Primary Data Collection 69 Secondary Data Collection 70 Ethical Issues 71 Chapter Five Findings 72 Introduction 72 Overview of the Study 72 Findings 72 Research Question One 73 Degree of relationship between the yield of FNMA-supported tranches and return on the US treasury bonds 73 Effect of Projected and Market Consensus on Subprime MSRs 76 Research Question Two 77 Relationship between the yields of FNMA-supported tranches and the assumption of the prepayment speed 77 Factors influe ncing the term structure of interest rate 79 Review on Subprime Meltdown 80 Research Question Three 80 Fundamentals of CMO valuation identified through secondary data gathering 81 Research Question 4 91 Quantitative representation of the MSR Price Impact 91 Component MSR Price Impact 91 summation MSR Price Impact 91 Impact on Sample Residual Interest is More Significant 92 Fixed-rate mortgage valuation methodologies 93 bench mark method 93 Rapid approximation method 96 Rational valuation approach 97 References 98 Dedication Acknowledgments Abstract Chapter One Introduction This proposed quantitative descriptive research study discusses the various valuation methodologies of prepayment speeds with Collateralized Mortgage Obligations (CMO) tranches and analyzing how the prevalent valuation methods are useful in current complex sparing scenarios. The objective of this study is primarily to examine the applicability of various methods of valuation for pricing the CMOs so as to determ ine their validity in the present scotch conditions. Chapter 1 provides a broad overview of the various facets with respect to the valuation of the prepayment speeds within CMO tranches. Collateralized Mortgage Obligations are derivative debt instruments that can be aptly defined as the claim that arises out of cash flows from large pools of home mortgages. The structure of CMO is such that once the principal and interest received from the mortgage holders it is distributed to tranches. The principal amount, the coupon rate, the prepayment fortune and the maturity date differ among the tranches (Economy Watch, n. d.). CMOs are derivative debt instruments providing both retail and institutional investors the possibility of higher yields with a Standard & Poors AA