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Mortgage backed securities hedge funds

• Generally focus on being long the actual mortgage backed securities and short some proxy such as TBAs (To Be Announced), futures, Treasuries or derivatives. These funds typically purchase highly rated agency paper, CMOs, or REMICs and finance the positions in the repo market. This financing can often result in gross asset, principal or market values of $10 billion for an initial cash/equity position of $1 billion dollars. In some respects it is comparable to buying a house with borrowed money. It is the borrowing which magnifies the performance. If the market quickly jumps 10 percent higher, then the buyer doubled his investment. Here, it would be 10 percent of $10 billion or a $1billion profit against an initial capitalization of $1 billion. However, if the market declines by 10 percent, then the original investor is out. If the market went down 25 percent, then the original investor is gone but the lending institution (bank or brokerage firm) is on the-hook for $1.5 billion. Effectively, this is what has been recently occurring in the financial industry. The lenders are becoming defacto new investors, holding losing positions, because of defaults.

 
 

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 Agency
Asset
Capitalization
Derivatives
Finance
Futures
Gross
Industry
Investor
Lending
Long
Market value
Market
Mortgage backed securities
Mortgage
Paper
Position
Principal
Profit
Proxy
Purchase
Repo
Securities
Short
To be announced
Treasuries
 
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12b 1 funds
Additional hedge
Adjustable rate mortgage
Alternative mortgage instruments
Asset backed securities
Asset backed security
Assumable mortgage
Assumption of mortgage
Beta equation mutual funds
Beta mutual funds
Bond arbitrage hedge funds
Book entry securities
Closed end mortgage
Collateralized mortgage obligation
Collateralized mortgage obligations
Commodity funds
Contingent securities
Conventional mortgage
Convertible securities hedge funds
Cost of funds
Cost of funds index
Covered or hedge option strategies
Cross hedge
Currencies and major foreign market hedge funds
Debt securities
Delta hedge
Delta hedge of an option
Discount securities
Distressed securities
Dividend yield funds
Emerging markets funds
Emerging markets hedge funds
Endowment funds
Equity hedge funds
Exempt securities
External funds required plug figure
Fed funds
Federal agency securities
Federal funds
Federal funds market
Federal funds purchased funds
Federal funds rate
Federal home loan mortgage corporation
Federal national mortgage association
Forward fed funds
Funds from operations
General securities registered representative license
Gmcs guaranteed mortgage certificates
Good funds
Government national mortgage association gnma or ginnie mae
Government securities
Graduated payment mortgage
Hedge
Hedge fund
Hedge fund types
Hedge properties
Hedge ratio delta
Long hedge
Macro hedge
Macro hedge funds
Manufactured housing securities
Market premium convertible securities
Marketable securities
Micro hedge
Money market hedge
Money market mutual funds
Mortgage
Mortgage backed securities
Mortgage backed securities clearing corporation
Mortgage bond
Mortgage duration
Mortgage pass through securities
Mortgage pass through security
Mortgage pipeline
Mortgage pipeline risk
Mortgage rate
Mortgage tax
Mutual funds
National association of securities dealers automated quotation system
National association of securities dealers, inc.
Natural hedge
Objective mutual funds
Open end mortgage
Organized securities exchanges
Partial hedge
Pass through securities
Pension funds
Perfect hedge
Project loan securities
Public securities administration
Real estate mortgage investment conduit
Registered general securities person
Registered securities principal
Remic real estate mortgage investment conduit
Reverse mortgage
Securities
Securities act of 1933
Securities analysts
Securities and exchange commission
Securities and exchange commission sec
Securities exchange act of 1934
Securities exchanges
Securities investor protection corporation
Securities registration
Sell hedge
Short hedge
Stocks and bonds hedge funds
Strip mortgage participation certificate strip pc
Stripped mortgage backed securities
Stripped mortgage backed securities smbss
Surplus funds
Target funds
Term fed funds
Treasury securities
Unlimited funds
Value funds
Vulture funds
Wholesale mortgage banking

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