Ortiz, Carlos; Stone, Charles; Zissu, Anne - In: Journal of Financial Transformation 28 (2010), pp. 79-85
Ortiz et al. [2008, 2009] develop models for portfolios of mortgage servicing rights (MSR) to be delta-hedged against interest rate risk. Their models rely on this fundamental relationship between prepayment rates (cpr) and interest rates, represented as a sigmoid function (S-shape). Defaults...