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READING 51 : MORTGAGES AND MORTGAGE-BACKED SECURITIES #59

Open Grefer opened 4 years ago

Grefer commented 4 years ago

https://www.melonsblog.cn/2020/01/reading-51-mortgages-and-mortgage.html#more

Grefer commented 4 years ago

The single monthly mortality (SMM) rate is also referred to as constant maturity mortality.

Grefer commented 4 years ago

When the drop is large enough to result in financing at less than the implied cost of funds, then the dollar roll is trading special. It could be caused by: A decrease in the back month price (due to an increased number of sale/settlement transactions on the back month date by originators). An increase in the front month price (due to an increased demand in the front month for deal collateral). Shortages of certain securities in the market that require the dealer to suddenly purchase the security for delivery in the front month, which would increase the front month price.

Grefer commented 4 years ago

Dollar Roll is similar to Reverse Repo: buy the securities at the lower price and sell them at the upper price.

Grefer commented 4 years ago

Attention: While computing the PMT, the service fee is usually built into the Mortgage rate already!!! ie : mortgage rate = Net Interest/Coupon + Service fee !!!