Mortgage Backed Securities (MBS) is one of the largest fixed income sectors, second only to U.S Treasuries. This course evaluates the features of MBS, such as prepayments, and their impact on valuation. Risks measurements including effective duration, effective convexity and option adjusted spreads are explored. Bloomberg screens are used to solidify the major points. Collateralized Mortgage Obligations (CMOs) are also examined. The course will primarily focus on agency MBS, but private labels will be introduced and their features and characteristics discussed. Agency Collateralized Mortgage Obligations (CMOs) are examined utilizing parts of a prospectus to highlight the major features. Finally, how these instruments may fit into a fixed income portfolio strategy will be explored.
Course Objectives
By the end of the course, participants will be able to:
- Identify the features and characteristics of agency MBS, CMOs and private label MBSs
- Analyze prepayment dynamics and the respective measurements
- SMM, CPR, and PSA
- Discuss the variety of risk measurements associated with MBS’s
- Analyze Bloomberg screens available to market practitioners for investment and risk management purposes
- Evaluate basic structures of CMOs
- Describe portfolio management strategies
Suggested Prerequisites:
- Fundamentals of the Capital Markets / Securities Industry
- Fixed Income or equivalent knowledge
Program Level:Foundational
Advance Preparation: None
Computers and Financial Calculators: Calculators
Recommended CPE Credits: 7