Mortgage- and asset-backed securities are not as complex as they might seem. In fact, all of the information, financial models, and software needed to successfully invest in and manage a portfolio of these securities are available to the investment professional through open source software. Investing in Mortgage and Asset-Backed Securities + Website shows you how to achieve this goal.

The book draws entirely on publicly available data and open source software to construct a complete analytic framework for investing in these securities. The analytic models used throughout the book either exist in the quantlib library, as an R package, or are programmed in R and incorporated into the analytic framework used.

• Examines the valuation of fixed-income securities-metrics, valuation framework, and return analysis
• Covers residential mortgage-backed securities-security cash flow, mortgage dollar roll, adjustable rate mortgages, and private label MBS
• Discusses prepayment modeling and the valuation of mortgage credit
• Presents mortgage-backed securities valuation techniques-pass-through valuation and interest rate models

Engaging and informative, this book skillfully shows you how to build, rather than buy, models and proprietary analytical platforms that will allow you to invest in mortgage- and asset-backed securities.

The mortgage- and asset-backed securities markets are viewed as the most complex of the securities markets. Motivated by the aftermath of the financial crisis and inspired by industry calls for open source waterfalls, investing expert Glenn Schultz sets out to develop the first open source software application for the analysis of mortgage-backed and asset-backed securities. Aided by open source analytics, Glenn outlines a valuation framework for the analysis of mortgage- and asset-backed securities. The successful results are shared in Investing in Mortgage-Backed and Asset-Backed Securities. Written in the spirit of reproducible research, this book allows the reader, for the first time ever, to replicate the mortgage analytics presented herein.

Indeed, all the information, financial models, and software needed to successfully invest in and manage a portfolio of mortgage-backed (MBS) and asset-backed (ABS) securities are available at a professional level through open source software, and Glenn walks you through the process of putting it all together in a powerful R and open source analytics package called Bond Lab^®. The open source software is available for download on the book's companion website and enables you to fully reproduce the analysis and valuation models outlined in the book.

Logically organized to serve as a cover-to-cover instruction guide as well as an everyday reference, Investing in Mortgage-Backed and Asset-Backed Securities starts you on the path to mastering:

• The fundamental principals of the time value of money and term structure modeling
• The comprehensive framework for the valuation of fixed income securities, especially those assets whose principal amortizes over the life of the investment
• Fixed income return analysis and how horizon return is applied to determine relative value across the mortgage- and asset-backed securities markets
• Using option-adjusted spread (OAS) analysis, perhaps the least understood and most misapplied valuation tool, as an accurate investment decision-making tool
• REMIC (CMO) structuring, the application of the division of principal and interest to create REMIC structures meeting investors unique risk/reward profile
• Default modeling, self-insuring mortgage structures, and the basics of sizing mortgage credit enhancement
• A comprehensive analysis of REMIC arbitrage and how dealers use derivative structures to maximize the value of the arbitrage

Groundbreaking in its purpose and execution, Investing in Mortgage-Backed and Asset-Backed Securities skillfully shows you how to build powerful models and proprietary analytical platforms to build a custom open source technology stack for the analysis of mortgage-backed and asset-backed securities.