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Mortgage-Backed Security (MBS) Instrument and Market Features

2024 Curriculum CFA Program Level I Fixed Income

Overview

This module builds on the prior ones that provided an overview of asset-backed secu- rities (ABS) and described the benefits of securitization, the securitization process, and typical securitization structures. This module focuses on the largest ABS market in the world, mortgage-backed securities (MBS). It introduces mortgage loans and their characteristic features; discusses residential MBS (RMBS), including mort- gage pass-through securities and collateralized mortgage obligations (CMOs); and describes commercial MBS (CMBS). It shows how to measure, mitigate, and share securitization-related risks across different tranches and their characteristics, and it examines MBS cash flows and risks.

1.25 PL Credit

If you are a CFA Institute member don’t forget to record Professional Learning (PL) credit from reading this article.