A 30 yr T-bond should always trade "near" par (barring big rate jumps) since it is, by definition, on-the-run. Perhaps you want to follow a...
Thanks, a lot of stuff there. The innovations can be conditionally Gaussian (or not), and nowhere did I say the unconditional distribution is...
Seems to me that that's roughly what I was saying. Explain to me why I don't understand the concept of "forecasting volatility."
Useful post. I have not searched, but will. ATM IV from a Gauss fit would certainly match ATM IV from a GARCH model if the tails were tossed out...
I agree that perhaps you don't need it: the derivative's worth whatever two people agree upon at that instant (with their information set)....
Dunno, but if the underlying really does exhibt GARCH effects, and the masses price it like a log-normal, you can take their money because you...
Curious why you say this.
Cutting ties completely also means you can no longer force them to confine business to residential mortgages, etc. Eventually they'll just be...
Agree on the first para, but also add that I think most guys below the very top are very very good and very very honest. Also, the shenanigans...
Yes, but what's in their MBS? A previous poster brought up the question of ARMs.
Someone correct me, but most of the retained portfolio consists of fixed rate mortgages, pooled as their own MBS. So ignore ARMs. Suppose you...
MV of assets drops, cost of debt not as much - they're typically short-funded, but try to keep the duration gap at 6 months or less. D/V is about...
Agreed... credit risk is less of a problem in a systemic way (though, who knows) than prepayment and interest rate risk. The problem with the...
Those are market forces, right? GSEs claim to hedge well, but don't use static hedges (though FRE is moving that way, I believe) precisely because...
Got it. Increased credit risk for banks (I don't think GSEs buy ARMs) is also a problem that might result from a GSE collapse (via the effect on...
Fannie originally held them (1938, 1968 spin off). Freddie started pooling and selling from the get-go (1970) ... Of course, the reason they...
Why would the home owner be entitled to compensation from the owner of the mortgage in the event of bankruptcy? House prices would only be...
I very much doubt that anything happens for the home owner. The agent that services the loan may change and this could have some small impact...
Curious, what's the tax situation for homeownership in Canada? As in the US, where owners get an interest deduction without paying tax on...
Great post, cuts through all the clutter.
Separate names with a comma.