What are subprime mortgage-backed securities?
Answer to relevant QuestionsWhat is meant by a derivative mortgage-backed security? How does a CMO alter the cash flow from mortgages so as to shift the prepayment risk across various classes of bondholders? Suppose that $1 billion of pass-throughs is used to create a CMO structure with a PAC bond with a par value of $700 million (PAC I), a support bond with a schedule (PAC II) with a par value of $100 million, and a support ...Answer the below questions. (a) What is a PO security? What is an IO security? (b) How is the price of an interest-only security expected to change when interest rates change? Answer the below questions. a. Why is it necessary for a nonagency mortgage-backed security to have credit enhancement? b. Who determines the amount of credit enhancement needed?
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