Point Counter-Point Is the Trading of Mortgages Similar to the Trading of Corporate Bonds? Point Yes....

Point Counter-Point

Is the Trading of Mortgages Similar to the Trading of Corporate Bonds?

Point

Yes. In both cases, the issuer’s ability to repay the debt is based on income. Both types of debt securities are highly influenced by interest rate movements.

Counter-Point

No. The assessment of corporate bonds requires an analysis of the financial statements of the firms that issued the bonds. The assessment of mortgages requires an understanding of the structure of the mortgage market (MBS, CMOs, etc.).

Who Is Correct?

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Expert Solution

One who is making a counter point appears to be correct because he is well aware about the complex nature of mortgage market which have various kinds of securities like mortgage-backed securities and collateralized mortgage obligation so the one who is making a counter argument is saying,that corporate bonds and mortgage bonds are different in nature and corporate bonds will generally be depending upon the financial statement of the company and they will be carrying the credit risk accordingly as mortgage market in not just dependent upon the credit risk of the company but they have a lot of macro risk associated with them, we can see when crisis of 2008 happened there was a lot of contagion in the system due to the fault of various players, and it can be seen that the mortgage market is different in it's structure due to complex nature of various derivative securities, so it can be said that both the market are not the same and mortgage markets have been designed in a more complex way in order to gain more profit whereas debt market is a straight market which is based upon the financial statement of the company completely

jeff jeffy answered 1 year ago

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Question

Point Counter-Point Is the Trading of Mortgages Similar to the Trading of Corporate Bonds? Point Yes....

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