Investing in Mortgage-Backed and Asset-Backed Securities, + Website: Financial Modeling with R and Open Source Analytics

419 Pages·2016·11.44 MB·English

by  Glenn M. Schultz

WILEY END USER LICENSE AGREEMENT
Go to www.wiley.com/go/eula to access Wiley’s ebook EULA.
Investing in
Mortgage-Backed
and Asset-Backed
Securities
TheWileyFinanceseriescontainsbookswrittenspecificallyforfinanceand
investment professionals, as well as sophisticated individual investors and
their financial advisors. Book topics range from portfolio management to
e-commerce, risk management, financial engineering, valuation and finan-
cialinstrumentanalysis,aswellasmuchmore.Foralistofavailabletitles,
visitourwebsiteatwww.WileyFinance.com.
Foundedin1807,JohnWiley&Sonsistheoldestindependentpublish-
ing company in the United States. With offices in North America, Europe,
AustraliaandAsia,Wileyisgloballycommittedtodevelopingandmarket-
ingprintandelectronicproductsandservicesforourcustomers’professional
andpersonalknowledgeandunderstanding.
Investing in
Mortgage-Backed
and Asset-Backed
Securities
Financial Modeling with R and
Open Source Analytics
+ Website
GLENN M. SCHULTZ, CFA
FOREWORD BY
FRANK J. FABOZZI, PH.D., CFA
Copyright©2016byGlennM.Schultz.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
PublishedsimultaneouslyinCanada.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin
anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,or
otherwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyright
Act,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthrough
paymentoftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222
RosewoodDrive,Danvers,MA01923,[phone],fax[phone],orontheWeb
atwww.copyright.com.RequeststothePublisherforpermissionshouldbeaddressedtothe
PermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030,
[phone],fax[phone],oronlineathttp://www.wiley.com/go/permissions.
LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest
effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe
accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied
warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreated
orextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategies
containedhereinmaynotbesuitableforyoursituation.Youshouldconsultwitha
professionalwhereappropriate.Neitherthepublishernorauthorshallbeliableforanyloss
ofprofitoranyothercommercialdamages,includingbutnotlimitedtospecial,incidental,
consequential,orotherdamages.
Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please
contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outside
theUnitedStatesat(317)572-3993orfax(317)572-4002.
Wileypublishesinavarietyofprintandelectronicformatsandbyprint-on-demand.Some
materialincludedwithstandardprintversionsofthisbookmaynotbeincludedine-booksor
inprint-on-demand.IfthisbookreferstomediasuchasaCDorDVDthatisnotincludedin
theversionyoupurchased,youmaydownloadthismaterialathttp://booksupport.wiley.com.
FormoreinformationaboutWileyproducts,visitwww.wiley.com.
LibraryofCongressCataloging-in-PublicationData:
Names:Schultz,GlennM.,author.
Title:Investinginmortgageandassetbackedsecurities,+website:
financialmodelingwithrandopensourceanalytics/GlennM.Schultz;
forewordbyFrankJ.Fabozzi.
Description:Hoboken:Wiley,2016.|Series:Wileyfinance|Includes
bibliographicalreferencesandindex.
Identifiers:LCCN2015035916(print)|LCCN2015047714(ebook)|
ISBN9781118944004(hardback)|ISBN9781119221531(ePDF)|
ISBN9781119221500(ePub)
Subjects:LCSH:Mortgage-backedsecurities.|Securities.|Investments.|
BISAC:BUSINESS&ECONOMICS/Investments&Securities.
Classification:LCCHG4655.S3872016(print)|LCCHG4655(ebook)|DDC
332.63/244—dc23
LCrecordavailableathttp://lccn.loc.gov/2015035916
CoverDesign:Wiley
CoverImage:©MaxKrasnov/Shutterstock
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
To Missi and Blake

Contents
Foreword xv
Preface xvii
Acknowledgments xxiii
Introduction xxv
PARTONE
ValuationofFixed-IncomeSecurities
CHAPTER1
TheTimeValueofMoney 3
1.1 PresentValue 3
1.2 FutureValue 4
1.3 PresentValueofanAnnuity 5
1.4 FutureValueofanAnnuity 6
1.5 SolvingFinancialQuestionswithPresentandFuture
Value 6
1.6 ApplicationtoFixed-IncomeSecurities 8
CHAPTER2
TheoriesoftheTermStructureofInterestRates 9
2.1 TheRationalorPureExpectationsHypothesis 10
2.2 TheMarketSegmentationTheory 13
2.3 TheLiquidityPreferenceTheory 14
2.4 ModelingtheTermStructureofInterestRates 15
2.4.1 RelationshipoftheYieldCurvetoSpotRates
andForwardRates 17
2.5 ApplicationofSpotandForwardRates 17
CHAPTER3
Fixed-IncomeMetrics 23
3.1 Maturity 24
3.2 YieldtoMaturity 24
vii