This course examines the mortgage backed securities market. The course begins with a quick historical background of the market. The features and characteristics of pass through structures are examined including their price and yield conventions. Factors impacting prepayments and how prepayments are measured and analyzed are examined. Effective duration and convexity are introduced as risk measures. Collateralized Mortgage Obligations (CMO's), IO's, and PO's are introduced and their features and characteristics are explored.

Objectives

By the end of the program the course participants will be able to:

• Identify the features and characteristics of MBS's, CMO's, and stripped products
• Explain the loan origination process
• Analyze prepayment dynamics and the respective measurements, i.e. CPR, SMM, and PSA
• Comprehend third party credit enhancements
• Analyze the variety of risk measurements associated with MBS's, including weighted average life, weighted average maturity, effective duration, and convexity
• Distinguish between the variety of derivative products (e.g. PAC's and TAC's)
• Identify the risks associated with this asset class
• Work with the different Bloomberg screens and various functions that are available to a market practitioner for trading and risk management purposes (e.g. what-if scenarios, stress testing, and pre-payment assumptions)

This course is designed for people whose jobs function:

• Directly interacts with the MBS markets such as sales and trading positions
• Supports a MBS desk such as finance and back office
• Has responsibilities that include examining and compliance for regulatory and accounting purposes