Click to login and read the full article.
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Abstract
Interest rate modeling is an integral part of the mortgage-backed security (MBS) pricing mechanism. The particular model choice can have a significant impact on both MBS valuation and its risk metrics. The market-implied interest rate volatility skew suggests that the interest rate distribution is often more normal than log-normal. A normal model tends to shorten the MBS durations while a log-normal model prevents the rates from going negative. This article shows how QGM models can have the best of both worlds.
- © 2013 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600