👉 Waiver math is a method used in real estate and finance to simplify complex financial instruments, particularly mortgage-backed securities (MBS), by breaking them down into smaller, more manageable components. This approach involves creating a series of tranches, each representing a portion of the cash flows from underlying mortgages. Each tranche has different risk and return profiles: senior tranches have lower risk and returns, while junior tranches offer higher returns but are more vulnerable to defaults. By structuring these tranches, investors can tailor their risk exposure and return expectations, making it easier to price and manage these securities. This simplification helps in assessing the overall risk and potential returns without needing to delve into the intricate details of each individual mortgage.
