Mortgage Backed Securities Scholarly Articles

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Mortgage Backed Securities Related Scholarly Compositions

See also: Mortgage Backed Securities Related News, Mortgage Backed Securities Related Books, or Mortgage Backed Securities Home Page.

Table of Contents:

Alphabetical Order
- A 3-factor Valuation Model for Mortgage-Backed Securities (MBS)
- Analysis of Yield Spreads on Commercial Mortgage-Backed Securities
- Commercial Mortgage-Backed Securities: An Exploration into Agency, Innovation...
- Commercial Mortgage-Backed Securities: Prepayment and Default
- Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market
- A model for portfolio management with mortgage-backed securities
- A New Strategy for Dynamically Hedging Mortgage-Backed Securities
- An Option-Theoretic Prepayment Model for Mortgages and Mortgage-Backed Securities
- Pricing commercial mortgages and their mortgage-backed securities
- Rational prepayment and the valuation of mortgage-backed securities
- The Relevance of Interest Rate Processes in Pricing Mortgage-Backed Securities
- Thin Markets, Asymmetric Information, and Mortgage-Backed Securities
- A Two-Factor, Stochastic Programming Model of Danish Mortgage-Backed Securities

A 3-factor Valuation Model for Mortgage-Backed Securities (MBS)
by Takeaki Kariya, Fumiaki Ushiyama, & Stanley R. Pliska
Kyoto University & University of Illinois at Chicago
September 4, 2002

Abstract
In this paper we generalize the one-factor MBS-pricing model proposed by Kariya and Kobayashi(2000) to a 3-factor model. We describe prepayment behavior due to refinancing and rising housing prices by incentive response functions. Our valuation of an MBS is based on discrete-time, no-arbitrage pricing theory, making an association between prepayment behavior and cash flow patterns...

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Analysis of Yield Spreads on Commercial Mortgage-Backed Securities
by Brian A. Maris & William Segal
North Arizona University & U.S. Department of Housing and Urban Development
September 4, 2002

Abstract
Yield spreads on commercial mortgage-backed securities (CMBS) declined dramatically from 1992 until 1997, then increased each of the next two years. The relationship between CMBS yield spreads and other economic variables is estimated in an effort to determine the extent to which recent trends can be explained by other variables. The results indicate that even after controlling for other observable factors, the yield spread on CMBS declined from 1992 until 1997, then increased each of the next two years...

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Commercial Mortgage-Backed Securities: An Exploration into Agency, Innovation, Information, and Learning in Financial Markets
by Timothy J. Riddiough & Risharng Chiang
University of Wisconsin - Madison & National Chung Hsing University

Abstract
This paper tracks a recent financial innovation, the commercial mortgage-backed security, through its early development in an attempt to better understand the dynamics of new product markets. Perhaps most importantly, we document a critical and central role of financial intermediaries in product market development. Instead of assuming a passive credit quality certification role, the rating agency actively controls security architecture and its instrumental in determining product design standards...

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Commercial Mortgage-Backed Securities: Prepayment and Default
by Brent W. Ambrose & Anthony B. Sanders
University of Kentucky & The Ohio State University
March, 2003

Abstract
One of the major developments in real estate finance during the 1990s was the emergence of a viable market for commercial mortgage backed securities. The growth in this market has spurred greater interest in empirical and theoretical research on commercial mortgage default and prepayment. We employ a competing risks model to examine the default and prepayment behavior of commercial loans underlying CMBS deals...

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Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market
by Xavier Gabaix, Arvind Krishnamurthy, & Olivier Vigneron
January 1, 2005

Abstract
“Limits of Arbitrage” theories require that the marginal investor in a particular asset market is a specialized arbitrageur rather than a diversified representative investor. We examine the mortgage-backed securities (MBS) market in this light. We show that the risk of homeowner prepayment, which is a wash in the aggregate, is priced in the MBS market...

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A model for portfolio management with mortgage-backed securities
by Stavors A. Zenios
The Wharton School, University of Pennsylvania
June, 1993

Abstract
We present a stochastic programming model for the management of large portfolios of mortgage-backed securities (abbreviated: MBS). It is a two-stage, multiperiod model, whereby portfolio decisions made here-and-now are influenced by uncertain information about the future. In particular, we consider uncertainty in both the prepayment activity of the MBSs in the portfolio, as well as uncertainty about the future reinvestment rates...

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A New Strategy for Dynamically Hedging Mortgage-Backed Securities
by Jacob Boudoukh, Matthew Richardson, Richard Stanton, & Robert F. Whitelaw
May, 1995

Abstract
This paper develops a new strategy for dynamically hedging mortgage-backed securities (MBSs). The approach involves estimating the joint distribution of returns on MBSs and T-note futures, conditional on current economic conditions. We show that our approach has a simple intuitive interpretation of forming a hedge ratio by differentially weighting past pairs of MBS and T-note futures returns...

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An Option-Theoretic Prepayment Model for Mortgages and Mortgage-Backed Securities
by Andrew Kalotay, Deane Yang, & Frank J. Fabozzi

Abstract
We introduce a new approach for modeling the prepayments of a mortgage pool and show how it can be used to value mortgage pools and agency mortgage-backed securities. We describe the full spectrum of refinancing behavior using a notion of refinancing efficiency. Our approach has two distinguishing features: (1) our primary focus is on understanding the market value of a mortgage, in contrast with standard models that strive (often unsuccessfully) to predict future cash flows, and (2) we use two separate yield curves, one for discounting mortgage cash flows and the other for MBS cash flows...

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Pricing commercial mortgages and their mortgage-backed securities
by James B. Kau, Donald C. Keenan, Walter j. Muller III, & James F. Epperson
University of Georgia, NCNB National Bank, & University of Alabama
December, 1990

Abstract
This article has taken considerable effort to accurately model the complexity of a commercial mortgage and its mortgage-backed security. In fact, it is the first example in the general literature on mortgage pricing to present a comprehensive set of numerical results in which the valuation of a mortgage-backed security is explicitly tied to that of the underlying mortgage. The conclusion we reach is that option pricing provides an accurate and flexible approach to valuing the complex mortgage instruments now being developed in the financial community...

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Rational prepayment and the valuation of mortgage-backed securities
by R. Stanton
Haas School of Business, University of California, Berkeley
1995

Abstract
This article presents a new model of mortgage prepayments, based on rational decisions by mortgage holders. These mortgage holders face heterogeneous transaction costs, which are explicitly modeled. The model is estimated using a version of Hansen's (1982) generalized method of moments, and is shown to capture many of the empirical features of mortgage prepayment...

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The Relevance of Interest Rate Processes in Pricing Mortgage-Backed Securities
by Ren-Raw Chen & T.L. Tyler Yang
1995

Abstract
This article examines how different interest rate processes affect the pricing of fixed-income securities. Specifically, it explores four widely used interest rate processes: (1) the Ornstein-Uhlenbeck process, (2) the mean-reverting square-root process, (3) the log-normal process, and (4) the Ho-Lee discrete binomial process. After comparing the mean square errors for prices of Treasury bonds and Goverment National Mortgage Association (GNMA) prices, it appears that the ability to fit the initial term structure is the most important characteristic of a sound interest rate process. In general, the mean square errors of GNMA prices are greater than those of Treasury bonds owing to additional errors in fitting the prepayment function...

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Thin Markets, Asymmetric Information, and Mortgage-Backed Securities
by E.L. Glaeser, & H.D. Kallal
January, 1997

Abstract
This paper tries to explain why the issuers of an asset would restrict what information is available about their asset. In a world where knowledge is valued, market forces should induce disclosure, but we often see markets (such as the market for mortgage-backed securities) where assets' issuers refuse to release valuable information. We present a model of market liquidity and find that market liquidity can both rise and fall with the quantity of released information...

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A Two-Factor, Stochastic Programming Model of Danish Mortgage-Backed Securities
by Soren S. Nielsen & Rolf Poulsen
June 11, 2002

Abstract
Danish mortgage loans have several features that make them interesting: Short-
term revolving adjustable-rate mortgages are available, as well as fixed-rate, 10-, 20-or 30-year annuities that contain embedded options (call and delivery options). The decisions faced by a mortgagor are therefore non-trivial, both in terms of deciding on an initial mortgage, and in terms of managing (rebalancing) it optimally. We propose a two-factor, arbitrage-free interest-rate model, calibrated to observable security prices, and implement on top of it a multi-stage, stochastic optimization program with the purpose of optimally composing and managing a typical mortgage loan...

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