Fixed Income Part 2

Lessons

CFA Level 2: Fixed Income Part 2 – Introduction

Mortgage Cash Flow Characteristics

Mortgage Pass-through Securities: Characteristics and Risks

Cash Flows and Prepayment Risk

Single Monthly Mortality (SMM) & Conditional Prepayment Rate (CPR)

PSA Prepayment Benchmark

Collateralized Mortgage Obligations (CMO) and CMO Tranches

Stripped MBS – Interest Only (IO) and Principal Only (PO)

Residential Non-Agency MBS

CMBS: Structure and Call Protection

Amortizing Loans vs. Non-Amortizing Loans

Overview of Asset Backed Securities (ABS)

Internal and External Credit Enhancements

Pay-through Structures: Prepayment Tranching vs. Credit Tranching

Home Equity Loans (HEL) Backed Securities

Manufactured Housing Backed Loans

Auto Loans Backed Securities

Student Loan Backed Securities (SLABS)

SBA Loan Backed Securities

Credit Card Receivable Backed Securities

Collateralized Debt Obligations (CDOs) and Synthetic CDOs

Cash Flow Yield, Nominal Spread, and Zero Volatility Spread for ABS/MBS

Monte Carlo Simulation for ABS/MBS

Duration and Convexity for ABS/MBS

Choosing an Appropriate Spread for ABS/MBS