Method, system, and computer program product for grading a collateralized mortgage obligation or other asset-backed security
AssigneeFederal Home Loan Mortgage Corporation (Freddie Mac)
InventorsJianyuan Cui, Marian J. Gora
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Abstract
The invention relates to a method, system and computer program product for grading asset-backed securities by assigning a relative grade, including one or more of a prepayment risk component and a complexity component, which may take into account one or more of weighted average life, volatility of weighted average life at moderate and stressed yield curve shifts, and complexity, in the absence of price information.
Claims34
A computer-implemented method for grading a collateralized mortgage obligation comprising one or more of a cash flow trigger, a cash flow ratio and a cash flow schedule, comprising the steps of:
- calculating in a processor-based apparatus a weighted average life of the collateralized mortgage obligation and storing a result in memory;
- determining a volatility of the weighted average life of the collateralized mortgage obligation at one or more shifts in one or more yield curves;
- determining a complexity of the collateralized mortgage obligation based on one or more of the number of the cash flow triggers, the cash flow ratios and the cash flow schedules, and
- assigning a grade to the collateralized mortgage obligation based on the weighted average life, the volatility of the weighted average life, and the complexity of the collateralized mortgage obligation.
A computer program product including instructions encoded on a computer-readable medium and configured to enable a process to perform a method for grading a collateralized mortgage obligation comprising one or more of a cash flow trigger, a cash flow ratio and a cash flow schedule, comprising the steps of:
- calculating in a processor-based apparatus a weighted average life of the collateralized mortgage obligation and storing a result in memory;
- determining a volatility of the weighted average life of the collateralized mortgage obligation at one or more shifts in one or more yield curves;
- determining a complexity of the collateralized mortgage obligation based on the number of the cash flow triggers, the cash flow ratios and the cash flow schedules, and
- assigning a grade to the collateralized mortgage obligation based on the weighted average life, the volatility of the weighted average life, and the complexity of the collateralized mortgage obligation.
A system for implementing a method for grading a collateralized mortgage obligation comprising one or more of a cash flow trigger, a cash flow ratio and a cash flow schedule, comprising:
- means for calculating a weighted average life of the collateralized mortgage obligation and storing it in memory;
- means for determining a volatility of the weighted average life of the collateralized mortgage obligation at one or more shifts in one or more yield curves;
- means for determining a complexity of the collateralized mortgage obligation based on the number of the cash flow triggers, the cash flow ratios and the cash flow schedules;
- and
- means for assigning a grade to the collateralized mortgage obligation based on the weighted average life, the volatility of the weighted average life, and the complexity of the collateralized mortgage obligation.
A system for implementing a method for grading a collateralized mortgage obligation comprising one or more of a cash flow trigger, a cash flow ratio and a cash flow schedule, comprising:
- a calculation mechanism configured to calculate a weighted average life of the collateralized mortgage obligation and storing it in memory;
- a calculation mechanism configured to determine a volatility of the weighted average life of the collateralized mortgage obligation at one or more shifts in one or more yield curves;
- a calculation mechanism configured to determine a complexity of the collateralized mortgage obligation based on the number of the cash flow triggers, the cash flow ratios and the cash flow schedules, and
- a calculation mechanism configured to assign a grade to the collateralized mortgage obligation based on the weighted average life, the volatility of the weighted average life, and the complexity of the collateralized mortgage obligation.
A method for grading a collateralized mortgage obligation comprising one or more of a cash flow trigger, a cash flow ratio and a cash flow schedule, comprising:
- determining in a processor-based apparatus a weighted average life of the collateralized mortgage obligation,
- determining a volatility of the weighted average life of the collateralized mortgage obligation at one or more shifts in one or more yield curves;
- determining a complexity of the collateralized mortgage obligation based on the number of the cash flow triggers, the cash flow ratios and the cash flow schedules, and
- assigning a grade to the asset-backed security based on the weighted average life, the volatility of the weighted average life, and the complexity of the collateralized mortgage obligation.
Dependencies are inferred from the claim text.