Publications
Publications
- May 2005 (Revised January 2006)
- HBS Case Collection
Mortgage Backs at Ticonderoga
Abstract
Ticonderoga is a small hedge fund that trades in mortgage-backed securities--securities created from pooled mortgage loans. They often appear as straightforward so-called "pass-throughs," but can also be pooled again to create collateral for a mortgage security known as a collateralized mortgage obligation (CMO). CMOs allow cash flows from the underlying pass-throughs to be directed, allowing the creation of different classes of securities--tranches--with different maturities, coupons, and risk profiles. In April 2005, the general managers of Ticonderoga are looking at the market data, trying to construct a trade given their view on the prepayment speed of mortgages vs. the implied prepayment speed they derive from CMOs in the market.
Keywords
Citation
Chacko, George C., Peter A. Hecht, Vincent Dessain, and Anders Sjoman. "Mortgage Backs at Ticonderoga." Harvard Business School Case 205-122, May 2005. (Revised January 2006.)