ANDREW DAVIDSON & CO., INC. DEVELOPS NEW IMPLIED PREPAYMENT
MODEL
New York City, January 24, 2000--Andrew Davidson & Co.,
Inc. today announced the release of their recently developed Implied
Prepayment Model for Mortgage-Backed Securities (MBS). This new
model computes the prepayment speeds implied by actual market valuations
of TBAs and compares the results to the speeds forecasted by the
Andrew Davidson & Co., Inc. MBS Prepayment Model.
The Implied Prepayment Model focuses on the current prices of liquid
TBAs and extracts the predictions of future prepayment speeds imbedded
in the prices. Analysts may use tuning parameters of the Andrew
Davidson & Co., Inc. Prepayment Model to adjust the generic
settings in order to reflect this gauge of market sentiment. Once
appropriately tuned, the model can provide another view of market
valuation and act as a guide to improve risk measures.
Eknath Belbase, PhD, was primarily responsible for the development
of the model. He said, "The implied prepayment model captures
the market's view of prepayments and complements our existing prepayment
models, which forecast future prepayments based on historical prepayments,
as well as our performance reports, which compare historical prepayments
to forecasts. It is a significant addition to our suite of prepayment,
valuation and risk-analysis tools and we look forward to applying
this model to the MBS markets in interesting ways in the future."
In conjunction with its release, Belbase has written a new Quantitative
Perspectives research paper detailing the use and development the
model. Both the Implied Prepayment Model and its accompanying Quantitative
Perspectives are available on the Andrew Davidson & Co., Inc.
website at www.ad-co.com.
Andrew Davidson & Co., Inc. provides consulting services, litigation
support, and risk analytics for mortgage and asset-backed securities.
The VectorsTM analytics library currently offers prepayment models
for both fixed and adjustable rate mortgages, prepayment models
for asset-backed securities, option-adjusted valuation and risk
management tools for MBS, ABS, CMOs, and interest rate processes.
The company's unique blend of consulting experience and expertise
with cutting-edge quantitative methods allows it to combine decades
of Wall Street experience with the most advanced modeling techniques
to produce informed, effective third-party software.
Contact: Ilda Pozhegu
Andrew Davidson & Co., Inc.
212 274-9075
ilda@ad-co.com
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