mortgage pipeline/cd syntehtication
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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.............
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