This book provides a practical analysis of the typical investments and funding sources of depository institutions. With a particular emphasis on mortgage-related investments (ARMs, CMOs, IOs, and POs), state-of-the-art valuation models are included that incorporate both call and default risk. Equity funding issues are also analyzed in detail. In addition, the author summarizes the history of the depository institution crisis, discusses the future outlook, and suggests a creative solution to the deposit insurance crisis that permits government deposit insurance without risk or cost to...