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Financial Management Association Survey and Synthesis Ser.: Mortgage Valuation Models : Embedded Options, Risk, and Uncertainty by Andrew Davidson and Alexander Levin (2014, Hardcover)
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Over the past 25 years, Andrew Davidson and Alexander Levin have been at the leading edge of MBS valuation and risk analysis. Issues such as complexity, borrower options, uncertainty, andmodel risk play a central role in the authors' approach to the valuation of MBS.
- Buy It NowMortgage Valuation Models: Embedded Options, Risk, and Uncertainty by Alexander
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About this product
Product Identifiers
PublisherOxford University Press, Incorporated
ISBN-100199998167
ISBN-139780199998166
eBay Product ID (ePID)201603056
Product Key Features
Number of Pages496 Pages
LanguageEnglish
Publication NameMortgage Valuation Models : Embedded Options, Risk, and Uncertainty
Publication Year2014
SubjectInvestments & Securities / Real Estate, General
TypeTextbook
AuthorAndrew Davidson, Alexander Levin
Subject AreaBusiness & Economics
SeriesFinancial Management Association Survey and Synthesis Ser.
FormatHardcover
Dimensions
Item Height1.2 in
Item Weight29.2 Oz
Item Length9.3 in
Item Width6.3 in
Additional Product Features
Intended AudienceScholarly & Professional
LCCN2013-034515
Reviews"Mortgage Valuation Models delivers much more than its title suggests. It explores the key aspects of the mortgage market that ultimately were a trigger of the financial crisis. It offers potential policy solutions to remedy deficiencies in the current market structures. Most of all, though, alongside its very rigorous treatment of the technical details of mortgage models, it provides frequent illustrations and guidance that will help readers to avoidhaving unrealistically high expectations of their mortgage models." --Mark Adelson, Chief Strategy Officer, BondFactor Company"This book is written by two top MBS experts who look at and far beyond the OAS relative value methodology. Davidson and Levin explain why mortgage instruments are valued at different OAS levels and how this is related to model risk and uncertainty. They demonstrate how to extend the idea of risk-neutral valuation to modeling both borrower prepayment behavior and default behavior, a major addition to the toolkit of MBS portfolio managers and traders. Thebook provides many important insights and analyzes the 2007-2009 crisis rigorously and quantitatively." --Frank J. Fabozzi, Professor of Finance, EDHEC Business School; Editor, The Journal of PortfolioManagement"This book is excellent. It combines a rigorous treatment of mortgage valuation models with a practical sense of what is important. It is easily comprehensible both to those familiar with the mortgage market and to those with reasonable quantitative backgrounds who are not. The chapters on the financial crises are particularly interesting, describing some of the trends that were overlooked in model calibration." --Laurie Goodman, Director, Housing FinancePolicy Center, Urban Institute"It is gratifying to see how prepayment modeling for mortgage-backed securities has evolved from statistical analysis of historical data to recognizing that refinancings are the result of rational option exercise by borrowers. Davidson and Levin do a commendable job of bringing us up to date, providing along the way an insightful perspective of the 2008-2009 mortgage crisis and the subsequent regulatory developments around housing finance." --Andrew Kalotay,President, Andrew Kalotay and Associates, Inc."Davidson and Levin offer their MBS valuation modeling framework as well as insights on the financial crisis and housing finance reform. As the housing market, mortgage industry and related governmental policies change, our MBS modeling needs evolve, too. This book places particular emphasis on modeling uncertainty during regime shifts. This intellectually stimulating book provides market participants with the tools to conceptualize these issues." --Jiawei"David" Zhang, Managing Director/Head of MBS Modeling, Credit Suisse, "Mortgage Valuation Models delivers much more than its title suggests. It explores the key aspects of the mortgage market that ultimately were a trigger of the financial crisis. It offers potential policy solutions to remedy deficiencies in the current market structures. Most of all, though, alongside its very rigorous treatment of the technical details of mortgage models, it provides frequent illustrations and guidance that will help readers to avoid having unrealistically high expectations of their mortgage models." --Mark Adelson, Chief Strategy Officer, BondFactor Company "This book is written by two top MBS experts who look at and far beyond the OAS relative value methodology. Davidson and Levin explain why mortgage instruments are valued at different OAS levels and how this is related to model risk and uncertainty. They demonstrate how to extend the idea of risk-neutral valuation to modeling both borrower prepayment behavior and default behavior, a major addition to the toolkit of MBS portfolio managers and traders. The book provides many important insights and analyzes the 2007-2009 crisis rigorously and quantitatively." --Frank J. Fabozzi, Professor of Finance, EDHEC Business School; Editor, The Journal of Portfolio Management "This book is excellent. It combines a rigorous treatment of mortgage valuation models with a practical sense of what is important. It is easily comprehensible both to those familiar with the mortgage market and to those with reasonable quantitative backgrounds who are not. The chapters on the financial crises are particularly interesting, describing some of the trends that were overlooked in model calibration." --Laurie Goodman, Director, Housing Finance Policy Center, Urban Institute "It is gratifying to see how prepayment modeling for mortgage-backed securities has evolved from statistical analysis of historical data to recognizing that refinancings are the result of rational option exercise by borrowers. Davidson and Levin do a commendable job of bringing us up to date, providing along the way an insightful perspective of the 2008-2009 mortgage crisis and the subsequent regulatory developments around housing finance." --Andrew Kalotay, President, Andrew Kalotay and Associates, Inc. "Davidson and Levin offer their MBS valuation modeling framework as well as insights on the financial crisis and housing finance reform. As the housing market, mortgage industry and related governmental policies change, our MBS modeling needs evolve, too. This book places particular emphasis on modeling uncertainty during regime shifts. This intellectually stimulating book provides market participants with the tools to conceptualize these issues." --Jiawei "David" Zhang, Managing Director/Head of MBS Modeling, Credit Suisse
Dewey Edition23
IllustratedYes
Dewey Decimal332.63230973
Table Of ContentIntroductionPart 1 Fundamentals of MBS Risk and Valuation Chapter 1 Dimensions of UncertaintyChapter 2 Fundamentals of SecuritizationChapter 3 Investors in Mortgage-Backed SecuritiesChapter 4 Valuation with Risk Factors and Risk NeutralityChapter 5 Short-Rate Term-Structure ModelingChapter 6 Risk-Neutral Modeling Using Forward and Futures PricesPart 2 Modeling and Valuation of Agency MBSChapter 7 Agency Pool Prepayment ModelsChapter 8 Engineering of Valuation Models without SimulationsChapter 9 Monte Carlo MethodsChapter 10 Applications of the OAS Valuation Approach to Agency MBSChapter 11 Prepayment Risk Neutrality (the concept of prOAS) Part 3 Modeling and Valuation of Non-Agency MBSChapter 12 Loan Level Modeling of Prepayment and DefaultChapter 13 The Concept of Credit OASChapter 14 Empirical Modeling of Home PricesChapter 15 Credit Analysis on a Scenario Grid and Analytical ShortcutsPart 4 Analysis of the 2008-2009 Financial Crisis Chapter 16 Lesson #1: The Role of Financing and Affordability in the Formation of Housing PricesChapter 17 Lesson #2: The CDO Calamity and Six Degrees of SeparationChapter 18 Lesson #3: Fair versus Intrinsic Valuation under Market DuressPart 5 Building a Healthy Housing Finance SystemChapter 19 How to Measure Risk, Rank Deals and Set Aside CapitalChapter 20 How to Price New LoansChapter 21 The Future of Housing Finance and MBS Modeling References
SynopsisMortgage-backed securities (MBS) are among the most complex of all financial instruments. Analysis of MBS requires blending empirical analysis of borrower behavior with the mathematical modeling of interest rates and home prices. Over the past 25 years, Andrew Davidson and Alexander Levin have been at the leading edge of MBS valuation and risk analysis. Mortgage Valuation Models: Embedded Options, Risk, and Uncertainty contains a detailed description of the sophisticated theories and advanced methods that the authors employ in real-world analyses of mortgage-backed securities. Issues such as complexity, borrower options, uncertainty, and model risk play a central role in the authors' approach to the valuation of MBS. The coverage spans the range of mortgage products from loans and TBA (to-be-announced) pass-through securities to subordinate tranches of subprime-mortgage securitizations. 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. It describes valuation methods for both agency and non-agency MBS including pricing new loans; approaches to prudent risk measurement, ranking, and decomposition; and methods for modeling prepayments and defaults of borrowers. The authors also reveal quantitative causes of the 2007-09 financial crisis and provide insight into the future of the U.S. housing finance system and mortgage modeling as this field continues to evolve. This book will serve as a foundation for the future development of models for mortgage-backed securities., 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., Valuation of mortgage-backed securities requires blending empirical analysis of borrower behavior and mathematical modeling of interest rates and home prices, with recognition of various prices of risk and uncertainty. This book offers a detailed description of the sophisticated theories and advanced methods used for the real-world valuation of MBS., Mortgage-backed securities (MBS) are among the most complex of all financial instruments. Analysis of MBS requires blending empirical analysis of borrower behavior with the mathematical modeling of interest rates and home prices. Over the past 25 years, Andrew Davidson and Alexander Levin have been at the leading edge of MBS valuation and risk analysis. Mortgage Valuation Models: Embedded Options, Risk, and Uncertainty contains adetailed description of the sophisticated theories and advanced methods that the authors employ in real-world analyses of mortgage-backed securities. Issues such as complexity, borrower options, uncertainty, andmodel risk play a central role in the authors' approach to the valuation of MBS. The coverage spans the range of mortgage products from loans and TBA (to-be-announced) pass-through securities to subordinate tranches of subprime-mortgage securitizations. 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. It describes valuation methods for both agency and non-agency MBSincluding pricing new loans; approaches to prudent risk measurement, ranking, and decomposition; and methods for modeling prepayments and defaults of borrowers.The authors alsoreveal quantitative causes of the 2007-09 financial crisis and provide insight into the future of the U.S. housing finance system and mortgage modeling as this field continues to evolve. This book will serve as a foundation for the future development of models for mortgage-backed securities.
LC Classification NumberHG4655
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