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The Valuation of Mortgage Backed Securities with Stochastic Probabilities of Default and Prepayment


Author Info

  • Francisco Venegas-Martínez

    (Instituto Politécnico Nacional)

  • J. Víctor Reynoso-Vendrell

    (Risk Management HSBC-México)


The aim of this paper is to provide a new approach to project the Mortgage Backed Securities (MBS) cash flows in emerging markets where collateral information is limited, wrong or scarce. Under this framework, we use the Cox Process to model stochastic probabilities of prepayment and default. The model deals with general intensity dynamics and is applied to the starting MBS Mexican market.

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Bibliographic Info

Article provided by Tecnológico de Monterrey, Campus Ciudad de México in its journal Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics).

Volume (Year): 1 (2007)
Issue (Month): 2 ()
Pages: 148-168

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Handle: RePEc:ega:rafega:200711

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Keywords: Mortgage valuation; MBS prepayment; MBS default; MBS curtailment; Cox Process.;

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