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Published: 19 June 2014

464 Pages

6-1/8 x 9-1/4 inches

ISBN: 9780199998166

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Bookseller Code (06)

Mortgage Valuation Models

Embedded Options, Risk, and Uncertainty

Andrew Davidson and Alexander Levin

Financial Management Association Survey and Synthesis

  • Links valuation theory of MBS to the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory. Describes the origin of Option-Adjusted Spread (OAS) and the concept of risk neutrality beyond interest rates
  • Engineering of OAS pricing methods with and without Monte-Carlo simulations
  • Prepayment modeling in physical and risk-neutral (market-implied) forms
  • Models of borrower's default
  • Modeling Home Prices
  • Valuation of non-agency MBS as it is tied to market indices
  • Non-Monte-Carlo shortcuts in credit analysis and pricing
  • Quantitative analysis of the 2007-2009 financial crisis: CDO calamity, reduced down-payment, Option ARMs, and other lessons of malignant design
  • Prudent methods of new-loan pricing and risk measurement
  • A look into a future housing finance system and MBS modeling

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