Title

Mortgage-Backed Securities: A Synopsis

Document Type

Article

Publication Title

RISEC: International Review of Economics and Business

ISSN

00356751

Volume

49

Issue

4

First Page

463

489

Publication Date

12-2002

Abstract

Today, mortgage-backed securities and their derivatives are some of the most popular securities held by institutional investors. Detailed explanations of how such securities are formed and valued, though, are usually beyond the scope of most investment textbooks. This paper, in turn, is a pedagogical review of such securities: their features, how mortgage-backed derivatives are constructed to address prepayment risk, and how the binomial model is used to value and analyze these interest-sensitive securities.