FREE Registration for Economics online tutoring and homework help.

Modeling Mortgage Prepayments and Valuing Mortgages Video Tutorial

Modeling Mortgage Prepayments and Valuing Mortgages: A mortgage involves making a promise, backing it with collateral, and defining a way to dissolve the promise at prearranged terms in case you want to end it by prepaying. The option to prepay, the refinancing option, makes the mortgage much more complicated than a coupon bond, and therefore something that a hedge fund could make money trading. In this lecture we discuss how to build and calibrate a model to forecast prepayments in order to value mortgages. Old fashioned economists still make non-contingent forecasts, like the recent predictions that unemployment would peak at 8%. A model makes contingent forecasts. The old prepayment models fit a curve to historical data estimating how sensitive aggregate prepayments have been to changes in the interest rate. The modern agent based approach to modeling rationalizes behavior at the individual level and allows heterogeneity among individual types. From either kind of model we see that mortgages are very risky securities, even in the absence of default. This raises the question of how investors and banks should hedge them.

Please click on the Like button if you liked this video.

Modeling Mortgage Prepayments and Valuing Mortgages - Video Lessons, Tutorials, Ebooks

At, get access to free study material for Economics in the form of video lessons, tutorials and downloadable ebooks. Not only that; you can get Free Homework Help to get solutions to Economics problems you're stuck with.

We also bring to you interesting stuff like text-books and CD's recommended by teachers and other students that you can buy from trusted online stores to get an extra edge to do well in Economics and other subjects.

Need help with Economics? Get an online Economics tutor to help you with and other areas of .

Register for our online Economics tutoring program to get homework help, help with test preparation and learn from experts to perform well in academics. SchoolTrainer specializes in tutoring for Economics. Our highly qualified Economics tutors can help you with Modeling Mortgage Prepayments and Valuing Mortgages, other Economics homework problems, test preparation and clarification of concepts.

More Free Study Material