Date of Award
Doctor of Philosophy (PhD)
We consider the problem of identifying current coupons for agency-backed To-Be-Announced pools of residential mortgage loans. In a doubly stochastic model which allows for prepayment intensities to depend upon current and origination mortgage rates, as well as underlying investment factors, we identify the current coupon with solutions to a degenerate elliptic, non-linear fixed point problem. Using Schaefer’s theorem we prove existence of current coupons. We also provide an explicit approximation to the fixed point, valid for compact perturbations off a baseline model where intensities only depend on the underlying factors. Numerical examples are provided which show that the approximation performs well in estimating the current coupon.
Cheng, Zhe, "Endogenous Mortgage Current Coupons" (2016). Dissertations. 825.