Printer Friendly

CMO VOLATILITY RATINGS LAUNCHED BY FITCH -- FITCH FINANCIAL WIRE --

 CMO VOLATILITY RATINGS LAUNCHED BY FITCH -- FITCH FINANCIAL WIRE --
 NEW YORK, Feb. 6 /PRNewswire/ -- Fitch announces a new system to rate the volatility of collateralized mortgage obligations (CMOs). Coverage starts today with 1,200 rated tranches. Fitch is accepting new issue rating requests, effective March 1.
 Known as Fitch V-Ratings, they are designed to meet investors' needs for a standard framework to analyze relative market risk of CMO tranches. Ratings are available on Telerate and Bloomberg. The $1.2 trillion mortgage market attracts money managers and individuals seeking safety and high returns. CMOs, which account for about half of mortgage debt sold, are divided into tranches which carry the high credit quality of underlying mortgages but can vary widely in market risk.
 V-Ratings, scaled V1 through V5, provide a reference point for investors to understand relative tranche risk when buying new issue CMOs. Ratings of V1, V2, and V3 indicate low to moderate volatility. Tranches rated V4 and V5 are more volatile over a range of interest rate scenarios. The ratings simplify a complex analysis of prepayment expectations, interest rate scenarios and individual CMO structures.
 Fitch's analytical model assesses changes in total return, price, and expected maturity by testing performance in ten divergent interest rate scenarios considering correlated prepayment expectations and specific collateral characteristics. Results are compared with other CMO tranches, mortgage certificates, and U.S. Treasuries. Credit ratings assume Treasuries are the highest rated benchmark. Volatility ratings do not. When subjected to some CMO stress tests, 30-year Treasuries appear in the V3 category.
 CMO tranches are owned by a variety of investors. Retail buyers of individual tranches are interested in specific tranche performance. Insurance companies tend to be influenced by cash flow and duration measurements. CMO bond funds look for total return. Under development by Fitch is an analytical model to combine portfolio cash flows to provide a volatility rating for CMO funds, institutional investors and their regulators.
 V-Ratings, which tend to remain constant or improve as volatility decreases with approaching maturity, will be reviewed by Fitch quarterly.
 -0- 2/6/92
 /CONTACT: Stephen Joynt, 212-908-0530, James Nadler, 212-908-0538, or Robert E. Phelan, 212-908-0529, all of Fitch/ CO: ST: IN: FIN SU: RTG


JT -- NY007 -- 7473 02/06/92 07:45 EST
COPYRIGHT 1992 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Feb 6, 1992
Words:373
Previous Article:BEST BUY COMPANY REPORTS JANUARY 1992 SALES
Next Article:INTELLIGENT ANNOUNCES 55 PERCENT INCREASE IN BIZMART'S JANUARY SAME STORE SALES
Topics:


Related Articles
FITCH ISSUES NEW V-RATINGS ON $12.1 BILLION CMOs -- FITCH FINANCIAL WIRE --
FITCH ASSIGNS V-RATINGS TO $2.57 BILLION OF KIDDER CMO REMICS -- FITCH FINANCIAL WIRE --
FITCH ASSIGNS V-RATINGS TO $1.06 BILLION KIDDER CMO REMICS -- FITCH FINANCIAL WIRE --
FITCH ASSIGNS V-RATINGS TO $2.3 BILLION KIDDER CMO REMICS -- FITCH FINANCIAL WIRE --
FITCH ASSIGNS V-RATINGS TO $1.28 BILLION KIDDER CMO REMICS -- FITCH FINANCIAL WIRE --
FITCH ASSIGNS V-RATINGS TO $679 MILLION KIDDER CMO REMICs -- FITCH FINANCIAL WIRE --
FITCH ASSIGNS V-RATINGS TO A $961 MILLION KIDDER CMO REMIC -- FITCH FINANCIAL WIRE --
LEHMAN FLOATING RATE US GOVERNMENT FUND 'AAA/V-1' UNDER NEW FITCH MARKET RISK SYSTEM -- FITCH FINANCIAL WIRE --
FITCH ISSUES QUARTERLY CMO V-RATING UPDATE -- FITCH FINANCIAL WIRE --
FITCH ASSIGNS V-RATINGS TO 14 NEW AGENCY CMO ISSUES -- FITCH FINANCIAL WIRE --

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters