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Name the four major classes of mortgage-related securities. As an issuer, explain the reasons for choosing...

Name the four major classes of mortgage-related securities. As an issuer, explain the reasons for choosing one type over another.

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Answer #1

Four major classes of mortgage related securities are:
1. MBBs( Mortgage - Backed Bonds)
2. MPTs(Mortgage pass-through certficate)
3. (MPTBs)Mortgage pay -through bonds
4. (CMOs) Collateralized mortgage obligations (CMOs).

The reasons behind choosing one type over other based on the market requirement. Market of one security might be more than the other. The risk involved in each security might be different from other like CMOs are safe because the collateral value is higher than the value of par value being issued . Prepayment risk is another factor while choosing the security because such risk are more in Mortgage - Backed Bonds.

Please Discuss in case of Doubt

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