Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Market price is used for determining the duration of a mortgage-backed security in the coupon curve duration. This approach to calculate the duration of mortgage-backed security was suggested by Douglas Breeden. The coupon curve represents generic pass-through securities of a particular issuer with different coupon rates. Duration is obtained by the coupon curve of prices rolling up and down. The prices obtained from rolling up and down the coupon curve of prices are substituted into the duration formula.
Let us determine the coupon curve duration from the data given below:
Coupon
Price
7%
8%
9%
10%
11%
12%
82.19
88.06
93.38
97.34
101.19
111.23
Let us calculate the coupon curve duration for the 9% coupon pass-through. If the yield declines by 100 basis points, then we assume that the price of the 9% coupon pass-through will also increase to the price of the current 10% coupon pass-through. Similarly, if the yield of the 9% coupon passthrough increases by 100 basis points, the price would decrease to the price of the current 8% coupon pass-through. Therefore, the price would be 97.34 when there is a decline of 100 basis points in the yield while the price would be 88.06 when the yield increases by 100 basis points.
P0 = 93.38
P+ = 88.06
P- = 97.34
Δy = 0.01
The estimated duration is as follows:
Duration = 97.34 - 88.06
2(93.38)(0.01)
= 4.97.
Q. What is Translation risk? This risk occurs on consolidation of financial statements prior to reporting financial results and for this reason is as well known as accounting e
what is the benefits of UMMB
Explain about opportunity cost of capital Risk free rate compensates for opportunity lost and risk premium compensates for risk. It can also be known as the 'opportunity cost o
Q. Explain the Procedure to Find Out IRR? Procedure to Find Out IRR:- Step I : Compute the fake payback period Fake Payback Period = Initial Cash Outflows / A
Capitalization ratios are used for determining the extent to which the corporation is trading on its equity, and the resulting financial leverage. These ratios
Prepare your recommendation on Agarwal Cast Company
Scenario: You are still a consultant for the Excellent Consulting Group. You have completed the first assignment, developing and testing a forecasting method based on linear regres
Which is lower for a given company: the cost of debt or the cost of equity? Explain: Ignore taxes in your answer . The cost of debt is all the time less as compared to the cost
Rating Symbol Capacity for Timely Repayment Rating Symbol Capacity for Timely Repay
The zero-volatility spread is a measure of the spread that the investor would realize over the entire Treasury spot rate curve if a mortgage-backed or asset-backe
The correct estimated duration is:Duration = (97.34 - 88.06) / 2(93.38)(0.01) = 4.332832
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd