CFA L1 Fixed Income: MBS Instrument & Market Features
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31 Terms
What is one problem with MBS?
Pre-payment risk
What are the two types of prepayment risk?
Contraction risk and extension risk
Contraction risk
Extension risk
What is the solution for the risks involved?
Mortgage definition
LTV ratio formula
DTI - debt to income formula
2 types of mortgages based on credit quality
What distinguishes agency and non-agency MBS?
Mortgage contingency features
What is recourse in a default?
What is a non-recourse in a default?
Mortgage securitization process
Weighted-average coupon formula
Weighted average maturity
Sequential pay CMO
Z-tranches
Principal only (PO) securities
Interest only (IO) securities
Floating rate tranches
Residual tranches
PAC and support tranches
CMBS
CMBS call protection
Defeasance
Balloon maturity provision
CMBS Risk: concentrated pool of loans
DSCR Formula
