Valuing fixed-income options and mortgage-backed securities with alternative term structure models

Article Abstract:

The multi-factor fixed parameter term structure model is assumed to be an accurate representation of the actual term structure of interest rates on which values of mortgage-backed securities and options on fixed-income securities are based. Differences in the prices of interest rate derivative securities are thus inferred to be due to the biases that alternative term structure models introduce into the valuation. Price biases arising from the use of alternative models are compared and implications for the selection of a model are discussed.

Economics, Models, Interest rates, Mortgage-backed securities, Mortgage backed securities, Fixed income securities

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Discussion of 'Post-IPO directors' Sales and Reissuing Activity: An Empirical Test of IPO Signalling Models.'

Article Abstract:

Research on initial public offerings (IPOs) has primarily concentrated on three anomalies since 1968. They are, namely, underpricing, 'hot issue' markets and underperformance over the long run. Signalling has been proposed as an explanation for the most widely reported anomaly, which is the systematic underpricing of IPO issues but research has yet to provide indisputable and definite answers to explain the underpricing phenomenon. Susanne Espenlaub and Ian Tonks contribute a welcome paper on the signalling explanation for underpricing.

Stocks & Other Equity Securities, Management Science, Research, Stock-exchange, Securities, Criticism and interpretation, Securities listing, Going public (Securities), Initial public offerings, New business enterprises, Startups, Espenlaub, Susanne, Tonks, Ian

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Pricing the competing risks of mortgage default and prepayment in stochastic metropolitan economies

Article Abstract:

A model of stochastic metropolitan economies, borrower behavior and lender revenue function has been developed. The model added household income, possible ability-to-pay problems and underwriting constraints to evaluate various influences on loan performances and values. The Monte Carlo simulation of loan values was based on parameters observed in sixty-two large metropolitan areas. The impact of the stochastic local economies on mortgage values are discussed.

Analysis, Mortgages, Default (Finance)

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