Mortgage Pool – Holding Period Return

This spreadsheet was originally compiled to help make the decision to either sell mortgages that were originated, or keep them. It can also be used to help with the decision to purchase a pool of whole loans, or a securitized mortgage pools. Two different concepts of return are referred to in this post. The two are […]

Forward Rates Part 3: Spot Rates

A newer version with four bootstrap methods can be found at: A Forth Way To Bootstrap Spot Rates This method of calculating spot rates is referred to as the bootstrapping method. Each spot rate (or zero coupon) along the Treasury yield curve needs the previous spot rates, in order to discount the current securities coupon payments. […]

Forward Rates Part 2: Forward Yield Table

In the last post, Forward Rates Part 1: Gap Analysis, we calculated the forward rate for a two year fixed rate investment, five years from now. Here is a review of the math: Why is everything multiplied by 2? That’s because we are assuming semiannual compounding. First we calculate the value of $1 in 5 years at […]

Forward Rates Part 1: GAP Analysis

  Gap Analysis, sometimes referred to as breakeven analysis, will get us 3/4 of the way to understanding forward rates. There are three different interest rates involved with gap analysis: Term Rate: Security with the longest term to maturity. Head Rate: A shorter maturity alternative to the Term Rate. Tail Rate: A rate that starts at the end of […]