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a bond investor is always exposed to credit risk credit risks can be classified into three types they aredefault riskcredit spread
reinvestment risk is the risk involved in reinvesting the proceeds received from the issuer against callable bonds during falling interest
the graphical representation of the relationship between yield and maturity is known as yield curve yield curve risk is the risk of
in a fixed-rate coupon bond the change in the price can be attributed to the change in the market interest rates this change is due to
different bonds trade at different yields though the coupon rate maturity and embedded options are same for them assuming that all the
various bond features largely affect the degree of correlation between the bonds prices and the bonds interest rates some of
bonds are usually recognized by yields which change from time to time owing to many market forces there exists an inverse relationship
an asset-backed security is a type of bond or note that is based on a pool of assets or collateralized by the cash flows from a specified
for holders of cards the interest is paid monthly and the principal is not amortized the principal payments made by credit
the issuers of albs are the financial subsidiaries of automobile manufacturers commercial banks and other independent finance companies
types of asset-backed securities1 auto loan-backed securities albs2 credit
the issuers right to call back the issue before the maturity date is referred to as a call provision in case of asset-backed securities
in a pass-through structure each certificate holder will be allotted a proportion of the cash flow from the underlying pool of loans or
it is in the form of third-party guarantees which protect against losses up to a particular fixed level this is available in
credit enhancement of an asset-backed security implies the existence of support for one or more of the bondholders in the structure
there are fixed as well as floating rate asset-backed securities a floating rate asset-backed security is one whose underlying pool
the asset that acts as a collateral for an asset-backed security can either be an amortizing or a non-amortizing asset in an
introductionwhen financial assets or bonds are pooled together and offered to the investors for receiving the inflow of funds
a mortgage may be defined as a pledge of property to secure payment of a debt depending upon the terms of mortgage agreed upon between
mbs are the most complicated securities that are sensitive to interest rates the factors that affect the price of mbs are
international mortgage-backed securities are the mortgage-backed securities that are issued in a country by a non-domestic entity with
these securities are backed by income-producing real estate usually in the form of warehouses shopping centers apartments office
the mortgage-backed securities dealt with till now are agency mortgage backed securities there are other mbs which can be for any
these securities aid in unpacking the cash flows from a pass-through the most uncomplicated stripped mortgage-backed securities are the
collateralized mortgage obligations cmoscmos retain many of the yield and credit quality advantages of pass-throughs while