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  1. BLOG

    Could coronavirus depress US housing prices? 

    Apr 15, 2020 Yihai Yu , Joy Zhang

    Risk Management , Fixed Income

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    The large economic shocks unleashed by the coronavirus pandemic could be comparable to or even exceed those of the 2008 global financial crisis (GFC). We used our models to assess whether these shocks could hurt U.S. housing prices as much as the GFC did.

  2. BLOG

    Coronavirus and a potential MBS convexity whipsaw 

    Mar 6, 2020 Yihai Yu

    Risk Management

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    Amid rising fears that the human toll of coronavirus will have a significant impact on the global economy, investors have sought safety in Treasurys and driven yields to all-time lows. This rate rally has posed a hedging challenge for investors in mortgage-backed securities.

  3. BLOG

    A reality check for MBS duration risk 

    Aug 15, 2019 Yihai Yu

    Risk Management , Fixed Income , Models/Client Cases

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    Empirical duration data can be used to check whether models for mortgage-backed securities are accurately measuring interest-rate risk.

  4. BLOG

    Are you ready for uniform MBS? (Part 2) 

    Apr 26, 2019 Yihai Yu

    Models/Client Cases , Fixed Income , Risk Management

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    Aligning prepayment speeds of Fannie Mae and Freddie Mac securities presents a major challenge to the success of uniform mortgage-backed securities (UMBS), which the two government-sponsored enterprises will launch on June 3.

  5. BLOG

    Are You Ready For Uniform MBS? (Part 1) 

    Apr 8, 2019 Yihai Yu

    Models/Client Cases , Fixed Income , Risk Management

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    Fannie & Freddie will conclude Single Security Initiative (SSI) June 3, 2019, creating a single to-be-announced (TBA) market & a new TBA security: the uniform mortgage-backed security (UMBS)

  6. BLOG

    How mortgage fees affect rates and spreads 

    Feb 7, 2019 Yihai Yu

    Models/Client Cases , Real Estate Investing , Fixed Income

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    How could potential changes in U.S. mortgage policy and possible long-term industry trends affect mortgage-related fees and rate spreads?

  7. BLOG

    Managing MBS risk in a rising rate environment (Part 2) 

    Nov 21, 2018 Yihai Yu

    Fixed Income , Risk Management

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    Will U.S. homeowners slow down the heady prepayment rate on their mortgages — even if interest rates remain unchanged, thus potentially harming returns of mortgage-backed securities (MBS) and extending the duration of these securities?

  8. BLOG

    Managing MBS risk in a rising rate environment (Part 1) 

    Sep 17, 2018 Yihai Yu

    Fixed Income , Risk Management

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    Bond investors lost $1 trillion during “the great bond massacre”1 of 1994, which was triggered by the Federal Reserve’s aggressive tightening of interest rates. Many U.S. mortgage-backed securities (MBS) investors and broker-dealers misjudged the risk that fixed-rate prime mortgage borrowers would defer prepayments due to market conditions. This risk — known as “extension risk” — means that borrowers may hold onto mortgages longer than previously expected.