PT - JOURNAL ARTICLE AU - Laurent Gauthier TI - Market-Implied Losses and Non-Agency Subordinated MBS AID - 10.3905/jfi.2003.319346 DP - 2003 Jun 30 TA - The Journal of Fixed Income PG - 49--74 VI - 13 IP - 1 4099 - https://pm-research.com/content/13/1/49.short 4100 - https://pm-research.com/content/13/1/49.full AB - 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.