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
How Debt securities is different from term loan Debt securities are different from term loans provided by financial institutions and banks to the company. Term loans are long t

Project your company's income statement and assets for five years. Identify your assumptions for major categories. Determine how you will finance your balance sheet (long-term de


Foreign Exchange Market Equilibrium: We say that the foreign exchange market is in equilibrium when deposits of all currencies o er the same expected rate of return (when retu

Issuance of securities  : Security issues by companies are a novel and common way of raising funds that in turn help realize their growth aspirations. It is therefore necessary


Securities Exchange Act of 1934 With this Act, the Congress created the Securities and Exchange Commission. The Act empowers the SEC with broad authority over all aspects of th

The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income

What are the coupon bonds security instruments? Coupon bonds are contractual agreements by the borrowers to make regular payments (known as coupons or interest) until a specifi

Q. What do you signify by Risk Analysis in Capital Budgeting? Risk Analysis: - Risk in an investment demotes to the variability that is likely to observe between the estimated