Asset Backed Securities why is it that firms or investors can get ABS's at a lower...

Asset Backed Securities

why is it that firms or investors can get ABS's at a lower rate?

for financial firms, why can they get funds cheaper and get relief from capitol requirements?

Expert Solution

Rahul Sunny answered 2 years ago

a. What are the pros and cons of asset-backed securities such as mortgage-backed securities to the...

a. What are the pros and cons of asset-backed securities such as mortgage-backed securities to the retail or institutional investors? b. What are the roles played by various financial institution(s)? c. Mutual funds have been gaining popularity among investors. From the investors’ point of view, illustrate why it is usually a better choice to buy the mutual funds than to buy asset-backed securities.

What are mortgage-backed securities, why were they developed, what types of mortgage backed securities are there,...

What are mortgage-backed securities, why were they developed, what types of mortgage backed securities are there, and how do they work?

Explain how negative convexity impacts the price of amortizing securities such as mortgage-backed or asset-backed bonds...

Explain how negative convexity impacts the price of amortizing securities such as mortgage-backed or asset-backed bonds relative to Treasuries when market yields change.

How do mortgage backed securities work? Why did banks think that selling mortgage backed securities would...

How do mortgage backed securities work? Why did banks think that selling mortgage backed securities would relieve them of the risks involved with mortgage lending? How did the banks indirectly come to once again be exposed to mortgage lending risk? What happened to bank reserves during the mortgage debt crisis? How did the Federal Reserve respond; and, in hindsight, do you consider the Fed's response to be appropriate and corrective? Explain why or why not?

5. Mortgage-Backed Securities and Risk Taking by Financial Institutions: Do you think that institutional investors that...

5. Mortgage-Backed Securities and Risk Taking by Financial Institutions: Do you think that institutional investors that purchased mortgage backed securities containing subprime mortgages were following reasonable investment guidelines? Address this issue for various types of financial institutions such as pension funds, commercial banks, insurance companies, and mutual funds (your answer might differ with the type of institutional investor). If Financial Institution are taking on too much risk, how should regulations be changed to limit such excessive risk taking?

3. Collateralized Debt Obligations (CDOs) (a) are Asset-Backed Securities (ABS) that are based only on sub-prime...

3. Collateralized Debt Obligations (CDOs) (a) are Asset-Backed Securities (ABS) that are based only on sub-prime mortgage loans in the U.S. (b) are not usually rated by rating agencies as the underlying default-free government securities act as collaterals. (c) are structured in tranches according to the underlying risk characteristics. (d) (a) and (b) of the above (e) (b) and (c) of the above 4. Which of the following was NOT a contributing factor to the sub-prime debt crisis in the...

The mortgage backed securities issued by Freddie and Fannie are fully backed by the Federal government.

explain the general difference(s) between residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities with respect to...

explain the general difference(s) between residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities with respect to the underlying collateral (physical real estate, not the loans).

You are a mortgage-backed securities investor with a broad portfolio of bonds backed by home mortgages....

You are a mortgage-backed securities investor with a broad portfolio of bonds backed by home mortgages. In recent times, interest rates have fallen drastically, and as a result many homeowners have begun to refinance their mortgages. What does this refinancing "wave" do for your expected returns? The best answers will be in terms of both reinvestment risk and the convexity properties of mortgage backed securities.

Provide a reason why a privately-held firm is valued higher/lower than comparable publicly-held firms. To get...

Provide a reason why a privately-held firm is valued higher/lower than comparable publicly-held firms. To get the full mark, you must discuss both cases.

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