- Credit Card + ABS - Z-spread or OAS? I understand that the answer was Z-spread 2. Nonagency issues have enhancements 3. Overcollateralization means that the loss is $3 Million 4. Highest Contraction Risk is A-Tranche, not IFL 5. Defeasance and Yield Maintenance are both enhancements 6. ??? Second Fixed Income 1. Cash Flow duration question - not sure what the options were, I think I got it wrong 2. Which bond was the cheapest? 3. Another relative valuation question? 4. ??? 5. ??? 6. ???
I had you can use both OAS or Zspread because the question said that prepayments on auto ABS are not related to interest rates so OAS should equal Zspread in this case.
You’re probably right - I’ll make the change. Do you remember the other questions?
what does "2. Nonagency issues have enhancements " mean just wondering if i had f-cked that one up.
I think that there was a question about the differences between agency issues and nonagency issues and the answer was that there were credit enhancements. I’m not positive that this question was on the exam and not on a practice test…
Unfortunately I put that too…but its use Z spread…since there is no prepayment option, using the Z spread is better than OAS because of Model Cost (time to crunch numbers) and Model Risk (in spite giving same values)
one of them related to waht happens to the bonds when volatility is changing, that was probably the 4th question in afternoon
i think the 6th FI Q in the AM was to compute the 95% yield volatility
that sounds about right, was it something like 3.22?
no clue, just guessed. there was also another FI Q somewher ein there whcih asked about yield volatitily. i put that it staysconstnat.
cash flow duration - i think the answer was that they had messed up the cupon curve statement… coupon curve is based on market rates not historic prices… valuation to put and call option bonds when volatility increases implied volatility and confidence interval due to standard deviation of a treasury bond still thinking…
Update 1. Credit Card + ABS - Z-spread or OAS? I understand that the answer was Z-spread 2. Nonagency issues have enhancements 3. Overcollateralization means that the loss is $3 Million 4. Highest Contraction Risk is A-Tranche, not IFL 5. Defeasance and Yield Maintenance are both enhancements 6. ??? Second Fixed Income 1. Cash Flow duration question - Which statement was wrong (answer coupon curve) 2. Which bond was the relatively cheapest? 3. When volatility increases which bond was cheapest 4. ??? 5. ??? 6. 95% Yield Volatility
did you put that they only messed up the coupon curve? i think they got the cash flow duration point right, right? dsomething about it being based on a model
yes, cash flow duration and emperical duration stmnts were right… coupon curve statement was totally flawed… hence thats the one i picked
uve got the FI mixed up. yield volatility was in AM–i know that becuase i discussed it with someone at lunch. the tranche Q and overcalletal were PM
can you do this for alt/corp/and port management as well, i cant remember any of those
Doesn’t the OAS assume you either use a binomial tree or monte carlo sim ? the Z spread doesnt do this, to say they are the same assumes a number of things about the Monte carlo sim used.