TY - JOUR T1 - Market-Implied Losses and Non-Agency Subordinated MBS JF - The Journal of Fixed Income SP - 49 LP - 74 DO - 10.3905/jfi.2003.319346 VL - 13 IS - 1 AU - Laurent Gauthier Y1 - 2003/06/30 UR - https://pm-research.com/content/13/1/49.abstract N2 - Market participants usually price new issue subordinated MBS in an ad hoc way that requires a lot of guessing and is subject to inconsistencies. An innovative method to value these securities uses market-implied loss distributions based on an analogy between derivatives products and non-agency subordinated bonds. Options are valued with implied volatilities, and subordinated MBS are valued with implied losses. This novel approach al-lows relative value analysis across the non-agency credit markets, and provides insight into some questions about the impact on fair value of subordination structural changes. ER -