In a well-protected PAC structure, what would you expect the distribution of the path present values and average lives to be compared to a support bond from the same CMO structure?
Answer to relevant QuestionsSuppose that the following values for a RMBS are correct for each assumption: PSA Assumption Value of Security 192 112.10 194 111.80 200 111.20 202 111.05 210 110.70 Assuming that the value of the security in the ...Answer the below questions. (a) What assumption is made about the OAS in calculating the effective duration and effective convexity of a RMBS? (b) Is it warranted? In the calculation of effective duration and effective convexity, why is a prepayment model needed? Why would you expect that a distressed convertible would have a delta of zero? Explain the limitation of using premium over straight value as a measure of the downside risk of a convertible bond.
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