MBS Trading Dollar Roll

Anonymous
timer Asked: Nov 17th, 2016

Question description

[30pts total] Dollar Rolls. Should there be any missing input data/information use (and justify) any reasonable assumption.

(a) [20] Create a dollar roll matrix of breakeven rates for an agency MBS with gross and deal coupons of 8.035% and 7.5%, respectively, and settlement dates 6/14/16 and 9/15/16. Assume standard fully amortizing fixed rate mortgages with a term of 30:0, a WAM of 29:5 and an immediate price of 96-16. MBS CF’s are due the owner of record on the first of each month, but are paid on the 25th of that month.(use one million start like example in BOA)

In the hardcopy you send in, you MUST show the analysis for a PSA of 150, a forward drop of 35/32, and a reinvestment rate of 2% (act/360).

Calculate breakeven rates for PSAs of 120, 150, and 180, and forward drops of -40, -35, and -30 (32’s).

(b) [5] Discuss the risks of roll vs. hold from the perspective of the investor.

(c) [5] Why does the dollar roll market exist?



) You MUST email me your spreadsheets, before the due date/time. Do not email any spreadsheets you did not hand in. Send in only one excel file, combining any separate workbooks into one. Answer the written questions on separate worksheets. The name of this file must be <last name_1>-<last name_2>-FRL383-MTProj.xlsx.

). Make sure that the layout is easily readable (e.g., do not have spreadsheets running over several pages; make sure it is logically arranged; ensure the font doesn’t require a microscope, etc.). The hardcopy should be sufficiently annotated to make it clear how you arrived at any particular number. Partial credit is hard to justify if all I see is a set of confused and/or wrong numbers.

Tutor Answer

(Top Tutor) Studypool Tutor
School: UT Austin
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags
Study Guides

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors