If I had to guess what you are referring to (and I could be wrong) I would think perhaps using treasuries or passthrus to hedge the duration of the held mortgages.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Alright, let's try this (these are not real numbers, just for examples sake):
You are long $100 million of MBS with duration of 15 years.
You want to hedge using treasuries which have a duration of 10 years.
Would you buy or sell treasuries? How much would you buy/sell to fully hedge at that point in time?
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
So you would sell $150 million of treasuries to duration hedge the MBS.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
have no idea what these numbers mean and how the process works.....is it just the 1 year CD or treasury (100-98.20) - 3 month ED future=Convergence cost, and then the 1 year CD+Convergence cost to get a 2 year CD?
No prob, I only dealt with Mortgages when I interned (so like a few weeks, only on synthetics for like a day). I'm not quite sure about that problem. I'll take a closer look into it in a few days.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
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this can mean a million things. Sounds like you are repeating something you don't understand. Generally speaking, not a great move.
yeah, it's something about locking in rates today?
If I had to guess what you are referring to (and I could be wrong) I would think perhaps using treasuries or passthrus to hedge the duration of the held mortgages.
yeah, thats exactly it- it's a basic question on one of my exams. Know where I can get some info on it?
Well, if you have Fabozzi read that. If not, perhaps this will help?
http://findarticles.com/p/articles/mi_m4131/is_n2_v19/ai_15943521/
hmm, thanks..
know a place where I can get an actual sample question?
Alright, let's try this (these are not real numbers, just for examples sake):
You are long $100 million of MBS with duration of 15 years. You want to hedge using treasuries which have a duration of 10 years.
Would you buy or sell treasuries? How much would you buy/sell to fully hedge at that point in time?
sell...........here's where you lost me.......
Alright, so you would do this:
10015= 10X X=100*15/10 X=150 million
So you would sell $150 million of treasuries to duration hedge the MBS.
awesome, know anything about syntethicating a CD?
here's what i have
1 Year CD 1% 1.00 %
Dec 2010 Target date = 1.20% 98.80
Spot 3 mo ED .25 Creep=convergence cost .95 .95%
1.95%= 2 yr CD
have no idea what these numbers mean and how the process works.....is it just the 1 year CD or treasury (100-98.20) - 3 month ED future=Convergence cost, and then the 1 year CD+Convergence cost to get a 2 year CD?
No prob, I only dealt with Mortgages when I interned (so like a few weeks, only on synthetics for like a day). I'm not quite sure about that problem. I'll take a closer look into it in a few days.
http://books.google.com/books?id=ca4n47Q_2bEC&pg=PA82&lpg=PA82&dq=%22sy…
page 81 clarifies a little.............
Velit est porro alias eligendi molestias incidunt quos. Sed veniam in molestias delectus expedita laboriosam excepturi. Saepe dignissimos qui iure nemo dolore voluptas.
Et amet quis quia velit quia qui qui. Eaque earum et amet fugit ducimus debitis. Incidunt debitis itaque dolorem.
Odio autem facilis aliquid dolores veniam porro. Nostrum ducimus et est aliquid. Est debitis nihil qui possimus laudantium cum.
Et accusamus ad assumenda molestiae. Iure velit nihil veniam eum neque quae eveniet. Sunt numquam perferendis quod odio unde veniam in. Eum id autem reiciendis porro ex eveniet.
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