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

categories: Americas, Asia Pacific, Australia, EMEAI, YU Yihai, ZHANG David, Asset Pricing and Valuation, Factor and Risk Modeling, Risk Management, Investing (Investment Management), Asset Managers (Quant or Fundamental), Asset Owners, Banks, Hedge Funds, Risk Management Analytics, Credit, Fixed Income

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.


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Research-Insight-A-‘Normal’-Choice-of-Interest-Rate-Model-for-MBS.pdf