Building blocks of a pass-through security, Financial Management

The main aim of securitization that was initiated in the late sixties was to resolve problems of mismatch and protect the US mortgage financing system from macroeconomic instability without forgoing, and credit rationing the presumed US friendly standard fixed-rate level payment mortgage which carried a fixed coupon interest rate, constant annuity payments, fixed maturity usually of 30 years and with an option for the borrower to repay fully or partly with the exercise price at par and without any termination option for the lender.

As the intermediary finally can sell only the cash flows contained in his asset portfolio, the mortgage design needs a relatively intricate long-term refinancing instrument which is a very long-term, fixed rate and callable refinancing vehicle. This could be attained by a combination of different varieties of instruments. Securitization of the entire package was seen as an elegant alternative. As a substitute of a complex on-balance sheet refinancing tool, the investor is offered exactly the cash flows that mortgage borrowers choose to make.

Posted Date: 9/8/2012 8:04:34 AM | Location : United States







Related Discussions:- Building blocks of a pass-through security, Assignment Help, Ask Question on Building blocks of a pass-through security, Get Answer, Expert's Help, Building blocks of a pass-through security Discussions

Write discussion on Building blocks of a pass-through security
Your posts are moderated
Related Questions
An Investor can receive income from this source when the bonds purchased at discount are held up to maturity or when he sells the bond before ma

Q. Calculate Average Annual Return? An investor buys a bond in 1978 maturity in 1980 at Rs.900. It has a maturity value of 10 years and par value of Rs. 1000. It fetches RS.90

Interest rates are the key determinants of business cycles in emerging market countries. In the past, several economies had experienced frequent and great changes

Q. Illustrate the Scope of Financial Management? Financial management as an educational discipline has undergone notable changes over the years with regard to its scope of func

What are the advantages and disadvantages of the internal rate of return method? The internal rate of return (IRR) method is a discounted cash flow method and a number expressed

Q. Show objections against profit maximization? 1) Profit cannot be ascertained well in advance to express the. Probability of return as future is Uncertain. It is not at all p

Hi, what is your time limits on providing solutions

Now we can calculate the yield for each possible call or put date. In addition, we can also calculate the yield to maturity. The lowest yield of all these possibl


what are the features of branch accounting