
	October 31, 2006 The Pipeline is Andrew Davidson & Co., Inc.'s monthly newsletter. Read on, and you will find that it contains a "pipeline" of relevant and useful information for participants in the fixed income industry. We address recent trends, changes and advances that our consultants, developers and sales force have extensively studied in the marketplace. We value your input and urge you to contact us with questions, comments or article suggestions at mail@ad-co.com. Happy Haunting!



	AD&Co. Update Valuation Commentary Model Performance Review Talking Credit

AD&Co. Update

It's Our Treat—Not a Trick—v5.1f

By Rob Landauer

Last month we announced the availability of a new version of our prepayment model, v5.2a, which provides a new suite of ARM/hybrid models for agency, jumbo prime and sub-prime loans. This month we fill in some gaps to the fixed rate loan types in the v5.1 prepayment model series with the release of v5.1f. Read more...

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Valuation Commentary

Valuation Consequences of the New ARM Prepayment Model in v5.2a

By Alex Levin

Part II: Non Agencies Take Off Their Mask

Version 5.2a features two non-agency ARM models, a non-agency prime model, and a sub-prime model. These models have been built using our unified framework. Much like their agency counterparts, they are designed within the Active-Passive (APD) structure, 4 sources of prepayments (turnover, refinancing, cashout, and cure) and the same set on tuning knobs. Read more...

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Model Performance Review

Seasonality of the Witch

By Dan Szakallas

Prepayments slowed in September, as expected. Speeds for FNMA 15-year 4.5's to 7.0's fell between 9% and 13%, which is right in line with the 10-12% drop we predicted last month. Drops for FNMA 30-yr 5.0's to 6.5's also fell between 10-12% from August. We saw similar drops for the FHLMC coupon stack, with 4.5's leading the way with a decrease of 15.0% from August. Read more...

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Talking Credit

Improving the Investors Prospective on Credit Risk

By Kyle Lundstedt, PhD

Investors in the secondary mortgage market historically worried most about interest rate and prepayment risks. The vast majority of issued securities came from the agencies - Fannie Mae, Freddie Mac, and Ginnie Mae - and the agency guarantees transformed all credit risk into a minor part of prepayment risk. Read more...

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