MountainView Publishes MSR Hedging Costs White Paper
Denver (May 17, 2011) – MountainView Risk Advisors has published a white paper about measuring and forecasting the costs of hedging mortgage servicing rights. While most large holders of MSRs have implemented hedging strategies, there is no typical methodology for evaluating the costs. MountainView’s paper examines the issue and recommends an evaluation framework.
“Returns associated with holding the MSR asset are among the most volatile of any financial derivative instrument,” according to Greg Harris, the paper’s author and a managing director at MountainView Risk Advisors. “The purpose of the capital markets hedge is to mitigate this volatility, and understanding the cost of the hedge is key to understanding the effectiveness of the hedge.”
The white paper defines major drivers of hedge performance and recommends a framework for evaluating the reasonable expected costs of a hedging strategy. It proposes a methodology that accurately reflects the tradeoff between expected results and the volatility of results associated with alternative hedging decisions. The paper also articulates the need for a robust attribution of hedging results and a feedback loop allowing the experienced results to inform hedge management and forecasting functions.
Mr. Harris said this research offers valuable insights for the chief financial officer, head of MSR valuation or head of MSR hedging at financial institutions and mortgage companies. Copies of the white paper can be obtained by calling him at 303-633-4724.
About MountainView Risk Advisors
MountainView Risk Advisors, a wholly owned subsidiary of MountainView Capital Holdings, provides customized MSR risk management solutions to a diverse group of clients seeking to minimize risks and maximize returns associated with the MSR asset. The staff has more than 25 years of experience managing MSR risk for some of the largest financial institutions, on both the buyside and sellside. This experience gives clients the opportunity to utilize best-in-class risk management programs and hedging strategies at a fraction of the cost of building the capacity in house.
About MountainView Capital Holdings
Headquartered in Denver, MountainView Capital Holdings is a financial services firm focused on the diverse needs of participants in the mortgage and fixed income capital markets. With expertise in asset management, valuation, risk management, trading, marketing and sales, MountainView is uniquely qualified to create value in all market conditions, and the firm continues to build on a longstanding commitment to offer a broad range of services.
Media Contact
Troy Rusniak | 303-870-8235 or trusniak@mvcg.com