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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27203
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| Title: | Pricing Mortgage-Backed Securities in a Multifactor Interest Rate
Environment: A Multivariate Density Estimation Approach |
| Authors: | Boudoukh, Jacob
Richardson, Matthew
Stanton, Richard
Whitelaw, Robert F. |
| Issue Date: | 24-Jan-1995 |
| Series/Report no.: | FIN-94-018 |
| Abstract: | This paper develops a nonparametric, model-free approach to the pricing
and hedging of mortgage-backed securities (MBS), using multivariate
density estimation procedures to investigate the relation between MBS
prices and interest rates. While the usual methods of valuing MBSs are
highly dependent on specific assumptions about interest rates and
prepayment, this method will yield consistent results without requiring
such assumptions. Weekly MBS prices from January 1987 to May 1994 can be
well described as a function of the level and slope of the term
structure. Using this estimated relation to hedge the interest rate risk
of MBS gives results that compare favorably with other commonly using
hedging methods. |
| URI: | http://hdl.handle.net/2451/27203 |
| Appears in Collections: | Finance Working Papers
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