Agency MBS Prepayment Model Using Neural Networks
categories: Americas, ZHANG David, ZHANG Joy, Asset Pricing and Valuation, Factor and Risk Modeling, Investing (Investment Management), Risk Management, Portfolio Management Analytics, Risk Management Analytics, Fixed Income
Mortgage-backed securities make up a huge portion of the U.S. financial system. Mortgage prepayment modeling is essential in MBS investment and risk analysis. It is also among the most complex areas of financial modeling, because of the vast data volume and large number of risk factors. Does an AI-based model using neural networks have an advantage over traditional models in taking on the complexities of MBS prepayment risk?