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Consulting Corner The TBA (To
be announced) market is one of the world's greatest and successful
market innovations. The TBA market
allows mortgage originators to sell mortgage loans before they are
closed and hedge the risk that mortgages won't close. Investors
can buy mortgages without the need to find the right number and
combination of small pools to add up to their investment target
and can finance their positions through dollar rolls. Read
more... Valuation Commentary The May issue of The Pipeline wrapped up the introduction
of valuation with prepay risk-and-option-adjusted spread (prOAS).
Since then two major things happened. First, AD&Co hosted it's
12th Client Conference. The first half of the day was dedicated
to these new modeling approaches. Second, a new AD&Co Quantitative
Perspectives, "Divide and Conquer: Exploring New OAS Horizons",
has been published and was made available to conference attendees.
Those who missed the conference... Read
more... Model Performance Review As expected,
prepayments decreased from April to May as rates rose approximately
50 basis points from the mid-April to the end of May. Speeds dropped
the sharpest in the 5.0 and 5.5 coupons, as these two groups became
discounts. For the range of 5.0's to 7.5's, FNMA 30's dropped by
35% from the previous month, while the corresponding GNMA 30's fell
by 22%. Actual pool CPR speeds of selected coupon buckets, along
with corresponding model forecasts, can be seen... Read
more... AD&Co. UpdateAD&CO
RECAP -- JUNE 2004 The 12th Annual AD&Co Client Conference held in New York City on June 17th was a resounding success. Attended by over 200 clients and friends, this year's conference provided a platform for the introduction of our new analytical paradigm called ValueNet, a forum for sharing the knowledge our consultants have garnered during the past year, and a rousing night of bowling. We were pleased to present seminars that focused on the analytical underpinnings of the ValueNet system including backward induction, the active-passive form of the prepayment model, enhanced pool level prepayment models, and the theory and application behind prOAS based risk parameters. These four models have been synthesized into a cohesive framework to form ValueNet, which provides an analytical framework that uniformly assesses the risk of MBS more quickly than brute force Monte Carlo. To access the presentations about ValueNet, please go to our website at www.ad-co.com and click on Research & Reports and then Research Reports. At the top of this page, you will see a link to 2004 AD&Co Annual Client Conference Presentations. Topics include Backward Induction, the v5.1 (Active-Passive form) of the Prepayment Model, and a prOAS primer. Access to these presentations is password protected. If you need a name and password, please click on the registration link on the top of the page. For a free trial of ValueNet through our website, please give Rob or Elena a call at 212-274-9075. The afternoon session featured two presentations by AD&Co consultants. The first, presented by Anne Ching, focused on the techniques AD&Co employs to value credit sensitive assets. Anne's presentation is also available and is entitled "Valuation of Complex MBS". Mickey Storms followed with an-depth look at the issues surrounding the fair value accounting for MBS and derivatives. Mickey's presentation is entitled: "Accounting vs Economics: A View of Fair Value Accounting." For more information on our consulting services, please do not hesitate to contact Laura Silberg. At the conclusion
of the day session, 75 hearty souls ventured to Chelsea Piers for
the evening's festivities. The night's top bowlers included Troy
Grande, Doug Bendt and AD&Co's Steve Heller who rolled the evening's
high game of 169. It turned out to be a great evening of networking,
eating, drinking and bowling under the neon lights. AD&Co thanks
everyone who contributed to the success of AD&Co's 2004 conference.
We look forward to seeing you all again in 2005. |
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