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Consulting Corner
Why Does Bad Accounting Happen to Good Companies?
By Andrew Davidson
As we approach year end, there is uncertainty in the markets as the dollar sinks against the euro and the yen. There is risk associated with rising rates from the twin deficits. New interest-only loans may pose unforeseen credit risk. Home prices are at all-time highs and could fall if rates rise. In such a difficult environment, what is the focus of financial institutions? How will they deal with the possible contingencies? Read more...
Valuation Commentary
AD&Co. OAS 5.2b: Enhanced Data, Bloomberg Links, Pay-ups & More
By Alex Levin
Our July Pipeline introduced a new OAS version 5.2 loaded with improvements. Now, using this OAS as the engine, we have built a more powerful Excel application featuring the ability to take advantage of the enhanced pool data (loan size, LTV, FICO, geography, purpose, type, occupancy). The Excel sheet even has a Bloomberg link so that a user can download available data automatically. Whereas enhanced data is a benefit, it's not a must: missing data is disregarded and carries no effect on prepayments. Read more...
Model Performance Review
New Prepayment Model Tuning Recommendations
By Dan Szakallas
Prepayments showed small increases for low coupons and cuspy premiums in the month of October. The FNMA 15 and 30-years showed small declines in higher premiums, exhibiting the effects of burnout. GNMA's increased almost across the board, as only the GNMA 15-year 7.5's posted a slight decrease of 5.7% from September. New recommended tunings to v433k for the conventional 15 year prepayment models are discussed in the article. Read more...
AD&Co. Update
A New & Improved HEL Model
By Sanjeeban Chatterjee
AD&Co. is developing a new model for sub-prime loans to replace the existing model. In this month's article, we describe the data we are using to develop the model, as well as some of the descriptive statistics obtained from the data. Read more...
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