Morningstar Junior Analyst Interview Questions, Process, and Tips

CMBS are securities backed by commercial mortgages, while RMBS are securities backed by residential mortgages.

• CMBS are backed by commercial properties such as office buildings, shopping centers, and hotels.

• RMBS are backed by residential properties such as single-family homes, condos, and townhouses.

• CMBS tend to have higher loan amounts and lower prepayment rates compared to RMBS.

• RMBS are more sensitive to changes in in...read more

Bankruptcy is a legal process where a person or business is unable to repay debts, while insolvency refers to a financial state of being unable to pay debts.

• Bankruptcy is a legal status declared by a court when a person or business cannot repay debts.

• Insolvency is a financial state where a person or business is unable to pay debts as they become due.

• Bankruptcy involves a formal legal process, while insolvency is a fina...read more

Prepayment risk refers to the risk that borrowers will pay off their loans earlier than expected, resulting in a loss of future interest payments for the lender.

• Prepayment risk is common in mortgage-backed securities, where homeowners can refinance their mortgages at lower interest rates, causing the investor to lose out on expected interest income.

• It can also occur in bonds or other fixed-income securities when intere...read more

Asset backed security is a type of financial security backed by a pool of assets, while CMBS specifically refers to securities backed by commercial real estate loans.

• Asset backed securities are backed by a variety of assets such as credit card receivables, auto loans, or student loans.

• CMBS are specifically backed by commercial real estate loans, such as office buildings, shopping centers, or hotels.

• Asset backed securit...read more

CMBS has more prepayment risk compared to RMBS and ABS.

• CMBS (Commercial Mortgage-Backed Securities) typically have higher prepayment risk due to the nature of commercial real estate loans.

• RMBS (Residential Mortgage-Backed Securities) have lower prepayment risk compared to CMBS as residential mortgages are less likely to prepay.

• ABS (Asset-Backed Securities) generally have lower prepayment risk as the underlying assets m...read more