Extended-lister
Showing 61 - 70 of 500 entries
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Research Report
MSCI Agency Prepayment Model UpdatesThe document describes the impact of MSCI Prepayment Model updates for the 2020 Adverse Market Refinance Fee. Initially planned to be effective from September 1, 2020, this additional surcharge has been announced by Fannie Mae and Freddie Mac (Enterprises), to cope with the increasing credit loss related to COVID-19 pandemic. On August 25, 2020, Federal Housing Finance Agency (FHFA) directed the Enterprises to delay the implementation until December 1, 2020 and exempt refinance loans with...
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Research Report
Building Single-Factor PortfoliosIn this study, we focus on some of the issues investors face when constructing long-only non-optimized single-factor portfolios using simple heuristics-based rank-select-weight algorithms. In doing so, investors may ask: Should they start from a universe of securities with a fixed target-market-cap coverage or a fixed number of securities? Should they assess factor exposure based on single or multiple factor descriptors? How broad a subset of securities will they use from the underlying...
Portfolio Management Analytics Risk Management Analytics
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Research Report
Liquidity Risk Management for Funds: Part 2: Best Practices for Stress TestingThis is the second in a series of research papers proposing MSCI’s best practices for fund liquidity risk management. Here we propose best practices for liquidity stress testing at funds, drawing on guidelines from the European Securities and Markets Authority for undertakings for the collective investment in transferable securities (UCITS) and alternative investment funds. When designing market stress tests, we create both historical and hypothetical scenarios. Both cover at least three...
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Research Report
Liquidity Risk Management for Funds: Part 1: Dilution EffectsThis is the first in a series of research papers proposing MSCI best practices for fund liquidity risk management. These practices were developed over the past years in collaboration with asset-management firms that have adopted MSCI’s liquidity risk management tools. The objectives of this study are as follows: to draw a synthesis from the progress generated in the field of fund liquidity risk management and address fund liquidity risk management through a systematic formulation of the...
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Research Report
A ‘Normal’ Choice of Interest-Rate Model for MBSThe valuation of mortgage-backed securities is highly dependent on the accuracy and mathematical construction of the chosen interest-rate models. In this document, we discuss two key aspects of the choice of an interest-rate model for MBS: volatility skew and correlation structures of forward rates.
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Research Report
What Type of Companies Were Best Prepared for Remote Work?COVID-19 disrupted the operating models of many businesses and forced a shift to remote working, digitization and low-contact transactions and services, which we term “Remote Operation Capability” (ROC). Some corporations were better positioned to take advantage of a remote, automated and digitized operating environment. We utilized machine-learning and natural language-processing techniques to build a potential ROC factor that looks at the extent to which a company was more likely to thrive...
Risk Management Analytics Portfolio Management Analytics
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Research Report
LiquidityMetrics Model ValidationLiquidityMetrics provides an analytical framework for liquidity risk management and regulatory reporting. This paper provides validation results for fixed-income securities through the lens of observed transaction costs. The validation period covers the relatively calm markets in 2019, as well as the onset and recovery from the COVID-19 crisis in 2020.
Risk Management Analytics LiquidityMetrics
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Research Report
Rank-Based Error Tracking for Agency MBS Prepayment ModelsModel testing, also called error tracking, is a key requirement for collateral behavior forecasting models in securitized products. The high dimensionality and statistical noise associated with agency mortgage-backed securities prepayment behavior makes error tracking a complex task. The traditional method focuses on a single dimension, and does not provide a clear measure of model accuracy and effectiveness. A rank-based error-tracking methodology provides an efficient and comprehensive...
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Research Report
MSCI Two-factor Interest Rate ModelThis paper describes the MSCI Two-factor Interest Rate Model. The future cash flow of Mortgage-Backed Securities (MBS) is uncertain due to the embedded prepayment options. The typical MBS valuation relies on Option-Adjusted Spread (OAS) framework to price these prepayment options, which are a series of derivatives of interest rates across multiple tenors. A stochastic term structure model is subsequently needed with a reference curve and a volatility surface, which generates distributions of...
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Research Report
Backtesting Private Asset ModelsMSCI’s Barra Private Real Estate Model (PRE2), Barra Private Equity Model (PEQ2) and MSCI Private Infrastructure Model (PIN1) have advanced the understanding of investments in global private assets. Private assets were once considered low-risk investments uncorrelated with most public assets due to the smoothness in private asset valuations. With innovative statistical methodology, the MSCI private asset models reveal the intrinsic risk in private assets, show large exposures to systematic...
Portfolio Management Analytics Risk Management Analytics