View Full Version : Question: Handbook of MBS (SN 116)
02-27-2008, 04:41 PM
page 311 says
The chief benefit of a tight window is the superior roll down the yield curve it provides as it ages.
I don't understand why this is the case. Any insights?
02-27-2008, 05:45 PM
Page 329 says
The coupon-paying bonds, Classes A, B and C, receive payments of interest at their stated coupon rates on their original principal balances.
This doesn't make sense to me. I thought these classes received interest on their outstanding principal balances.
02-27-2008, 06:01 PM
Another follow-up question (another crappy Fabozzi book)...
Page 332 in discussing the benefits of including a Z bond in a structure states
Furthermore, since the timing of cash flows from the Z bond depends on when the earlier tranches are retired, the Z bond itself also is more stable.
More stable than what? The alternative being compared against is the structure with no Z at all.
ETA - I think I have answered my own question...
I believe what they meant to write (not what they actually wrote) is that in addition to supporting earlier tranches, the last tranche in the structure is itseld more stable as a Z than it would be as a non-Z.
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