Valuing RMBS and CMBS

What is the process involved in valuing these securities? I had a “preinterview” over the phone with a small buyside shop that is involved with buying mortgage backs. We didn’t get into the specifics of the analytics during our conversation. What exactly is the process involved with valuing these assets? Aside from the obvious risks of taking a job like this right now, my instinct tells my this type of analytical work would be quite monotonous. I would imagine it involves a lot of tedious modeling that would not be anywhere near as interesting as valuing corporate bonds or equities (which is what I really want to do). Is this a correct assumption? The guy also seemed like a douche too. Made way too many corny jokes. My inclination is to not follow up. What do you think?

Wow - that’s just not close, but you probably shouldn’t get the job if you feel that way. Valuing RMBS and CMBS is much more interesting math than either of those other two for one thing.

Yeah it’s fairly quantitative and I doubt you’ll get lots of detailed answers here unless someone who knows how it’s done has the time to explain it. Even if they do (I’m sure JDV knows more than a little about how it’s done) you’ll probably have to be very math-oriented to figure it out. You can probably find a lot more info about this on the Wilmott forums – I have seen several threads discussing this particular issue. Here’s some qualitative introductory info that might help you:

Distinction: Joey said more interesting “MATH” than the others. That is likely true. A more interesting PROCESS? That is all in the eye of the beholder!

Caveat: Interesting math that doesn’t work but nonetheless is sufficiently difficult looking to sell the bonds to others.

It’s pretty difficult in this environment. It’s very interesting though, a lot of variables go into it. ABS is pretty interesting, I don’t think it gets enough coverage in the exams.