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Mortgage-Backed Securities in a Strategic Asset Allocation Framework

In: Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds

Author

Listed:
  • Myles Brennan
  • Adam Kobor

Abstract

To perform robust asset allocation analysis, investors need reliable quantitative models to assess the expected risk and return profile of the asset classes and sectors that may become constituents of the strategic asset mix. This Chapter has been written for fixed income investors who would like to consider a strategic asset allocation to agency guaranteed mortgages (MBS) in their portfolios. Within the US high grade fixed income universe, the largest sector is the MBS sector, comprising close to 40% of the universe. So a reliable asset class model for MBS should be useful to a significant number of fixed income investors. In fact, this Chapter should be relevant for multiasset investors as well, who may consider US high grade fixed income simply as one asset class among others, like equities or real estate. In their case, MBS by definition receives a near 40% weight within their fixed income allocation, so it is beneficial for them to be able to reliably model the behaviour of the MBS sector.

Suggested Citation

  • Myles Brennan & Adam Kobor, 2010. "Mortgage-Backed Securities in a Strategic Asset Allocation Framework," Palgrave Macmillan Books, in: Arjan B. Berkelaar & Joachim Coche & Ken Nyholm (ed.), Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, chapter 12, pages 225-248, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-25129-8_12
    DOI: 10.1057/9780230251298_12
    as

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