Suppose that a support bond is being analyzed using the Monte Carlo simulation methodology. The theoretical value using 1,500 interest-rate paths is 88. The range for the path present values is a low of 50 and a high of 115. The standard deviation is 15 points. How much confidence would you place on the theoretical value of 88?
Answer to relevant QuestionsIn 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? Explain why you agree or disagree with the following statement: “When the Monte Carlo simulation methodology is used to value a RMBS, a PSA assumption is employed for all interest-rate paths.” What is vector analysis? Answer the below questions. a. Suppose that a convertible bond has a conversion ratio of 20 and a delta of 0.70. For a price change of $0.125 for the stock price per share, what is the approximate change in the convertible ...This excerpt is taken from an article titled “Caywood Looks for Convertibles,” which appeared in the January 13, 1992, issue of BondWeek, p. 7: Caywood Christian Capital Management will invest new money in its $400 ...
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