Explain how, given the cash flow on the simulated interest-rate paths, the theoretical value of a RMBS is determined.
Answer to relevant QuestionsExplain how, given the cash flow on the simulated interest-rate paths, the average life of a RMBS is determined. Why would the option-adjusted spread vary across dealer firms? What are the complications of assessing the potential total return of a CMO tranched using the total return framework? Give two reasons why a CMO tranche is a path-dependent cash flow security. What is the difference between a soft put and a hard put?
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