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DAS is a simple and quick mean variance approach useful for estimating
the default costs inherent in subordinated MBS with different ratings,
in terms of both dollars and yield. DAS provides interesting insights
into the dispersion of subordinated MBS prices as credit losses vary
and provides investors with a measure of return that more rationally
considers the expected cost of the short default option by rating. The
DAS framework is flexible in that the mean loss rate, variance and the
dispersion of cumulative loss rates analyzed are easily changeable to
suit the investor's subjective view of credit losses. The DAS framework,
therefore, works across a wide range of collateral types, including
Jumbo-A loans, HELs or mobile home loans. DAS can be valuable as a tool
used in assessing the net returns offered within MBS credit markets
over time as subordination levels change and the credit loss history
of various collateral types evolves.
