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Consulting Corner
Bad Accounting: Don’t just get mad, get even
By Andrew Davidson
The current accounting paradigm has given importance to certain measures of economic value such as Fair Value, retained earnings and comprehensive income. As a consequence, companies are incented to generate good results measured in these accounting terms. This issue of Pipeline presents a hedging technique that financial institutions can use to help manage their key reporting results. Read more...
Valuation Commentary
A New Member of AD&Co: The Two-Factor Gaussian Term Structure (part 1)
By Alex Levin
Until recently, the AD&Co suite of term structure models had consisted of three “members," the Hull-White model, the Black-Karasinski model and the Squared Gaussian model. Each of these models is a single-factor model driven by the short rate. Limitations of single-factor modeling are well known — it is hard to believe that all rates are perfectly correlated. Recognizing that the fixed-income world is indeed multi-factor and that some instruments could have been valued differently had we used more realistic rate dynamics, we recently added Read more...
Model Performance Review
Model Performance
By Dan Szakallas
Once again prepayments showed little change from the previous month as December prepayments remained consistent with those seen in November. Prepayments on premiums showed small increases, mostly in the 4-5% range. No FNMA 30-year coupons changed more than 6% from November. As rates have remained constant over the last few months, there has been little refinance incentive to trigger a noticeable change in prepayments. Actual pool CPR speeds of selected coupon buckets, along with corresponding model forecasts, can be seen Read more...
AD&Co. Update
January 2005
By Rob Landauer
License Key Expiration Date: Over the last two weeks, Ilda has been emailing renewal license keys to all of our clients. This key must be installed in the appropriate directory prior to February 1, 2005 to avoid the dreaded “license key expired” message. The new key will be in effect until July 31, 2005. If you did not receive your key or if you have any questions, please do not hesitate to contact Ilda
Enhanced Pool Prepayment Model: We continue to fine tune our new Enhanced Pool Level Prepayment Model. This week we released v5.1b, which incorporates data through October of 2004 – an additional 8 months of data from the previous version (v5.1a). We urge clients to test drive this model through our web based demo to view the impact loan size, LTV, Credit Score, state of origination and other factors Read more...
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