Mortgage Valuation Models Fmasss C

Erscheinungsjahr 2014
ISBN: 978-0-19-999816-6
Verlag: Sydney University Press

Buch, Englisch, 464 Seiten, Format (B × H): 161 mm x 244 mm, Gewicht: 830 g

Reihe: Financial Management Association Survey and Synthesis Series

Mortgage Backed Securities (MBS) are among the most complex of all financial instruments. Analysis of MBS requires blending empirical analysis of borrower behavior with mathematical modeling of interest rates and home prices. Over the past 25 years, Davidson and Levin have been at the leading edge of MBS valuation and risk analysis. Mortgage Valuation Models: Embedded Options, Risk and Uncertainty is a detailed description of the sophisticated theories and
advanced methods that the authors employ in real-world analysis of mortgage backed securities. Issues such as complexity, borrower options, uncertainty, and model risk play a central role in their approach to valuation of MBS.

The book describes methods for modeling prepayments and defaults of borrowers. It explores closed form, backward induction and Monte Carlo valuation using the Option-Adjusted-Spread (OAS) approach, explains the origin of OAS and its relationship to model uncertainty. With reference to the classical CAPM and APT, the book advocates extending the concept of risk-neutrality to modeling home prices and borrower options, well beyond interest rates.

The coverage spans the range of mortgage products from loans, TBA (to be announced) pass-through securities to subordinate tranches of subprime-mortgage securitizations and describes valuation methods for both agency and non-agency MBS including pricing new loans; Davidson and Levin put forth new approaches to prudent risk measurement, ranking, and decomposition that can help guide traders and risk managers. It reveals quantitative causes of the 2007-09 financial crisis and provides insights
into the future of the US housing finance system and mortgage modeling.

Despite the advances in mortgage modeling and valuation, this remains an ever-evolving field. Mortgage Valuation Models will serve as a foundation for the future development of models for mortgage-backed securities.

Autoren/Hrsg.

Davidson, Andrew

Levin, Alexander

Fachgebiete

• Mathematik | Informatik Mathematik Numerik und Wissenschaftliches Rechnen Angewandte Mathematik, Mathematische Modelle
• Wirtschaftswissenschaften Betriebswirtschaft Wirtschaftsmathematik und -statistik
• Wirtschaftswissenschaften Finanzsektor & Finanzdienstleistungen Anlagen & Wertpapiere
• Mathematik | Informatik EDV | Informatik Angewandte Informatik Wirtschaftsinformatik

Über Autor(innen)

Andrew Davidson is a financial innovator and leader in the development of financial research and analytics. He has worked extensively on mortgage-backed securities product development, valuation, and hedging. He is president of Andrew Davidson & Co., Inc., a New York firm specializing in the application of analytical tools to investment management, which he founded in 1992. He is co-author of the book Securitization: Structuring and Investment Analysis and
Mortgage-Backed Securities, Investment Analysis & Valuation Techniques and has written numerous articles that have appeared in The Handbook of Mortgage-Backed Securities, Mortgage-Backed Securities: New Applications and Research and The Journal of Real Estate Finance and Economics. He received an MBA in
Finance at the University of Chicago and a BA in Mathematics and Physics at Harvard.

Alex Levin is Director of Financial Engineering at Andrew Davidson & Co., Inc. He has developed innovative and efficient valuation models for MBS, including the Active-Passive Decomposition burnout model, the concept of prepay risk-and-option-adjusted valuation, and the method of Credit OAS and non-Monte Carlo shortcuts. His recent work focuses on the valuation of instruments exposed to credit risk, home-price modeling, and projects related to the MBS crisis. Alex has been a guest
speaker at both academic and practitioner events and has published a number of papers. He holds an M.S. in Applied Mathematics from Naval Engineering Institute, Leningrad, and a Ph.D. in Control and Dynamic Systems from Leningrad State University.