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A ‘Normal’ Choice of Interest-Rate Model for MBS
Jul 13, 2020
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 authors
- Yihai Yu, Executive Director, MSCI Research
- David Zhang, Managing Director, MSCI Research