Mortgage-Backed Securities

Moorad Choudhry, Didier Joannas, Gino Landuyt, Richard Pereira and Rod Pienaar
Additional contact information
Moorad Choudhry: Europe Arad Bank plc
Didier Joannas: Thomson Reuters-Risk in North Asia
Gino Landuyt: Europe Arad Bank plc
Rod Pienaar: UBS AG prime services

Chapter 13 in Capital Market Instruments, 2010, pp 254-272 from Palgrave Macmillan

Abstract: Abstract In Chapter 12 we introduced asset-backed bonds, debt instruments created from a package of loan assets on which interest is payable, usually on a floating basis. The asset-backed market was developed in the United States and is a large, diverse market containing a wide variety of instruments. The characteristics of asset-backed securities (ABS) present additional features in their analysis, which are investigated in this and the next two chapters. Financial engineering techniques employed by investment banks today enable an entity to create a bond structure from any type of cash flow; the typical forms are high volume loans such as residential mortgages, car loans and credit card loans. The loans form assets on a bank or finance house balance sheet, which are packaged together and used as backing for an issue of bonds. The interest payments on the original loans form the cash flows used to service the new bond issue.

Keywords: Interest Rate; Cash Flow; Interest Payment; Yield Spread; Original Loan (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1057/9780230279384_13

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