Extended Viewer

A ‘Normal’ Choice of Interest-Rate Model for MBS

The valuation of mortgage-backed securities is highly dependent on the accuracy and mathematical construction of the chosen interest-rate models. In this document, we discuss two key aspects of the choice of an interest-rate model for MBS: volatility skew and correlation structures of forward rates.


Download

Research Author

  • Yihai Yu - Executive Director, MSCI Research
  • David Zhang - Managing Director and Head of Securitized Products Research