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Historical Analysis
History of the current-coupon OAS. The use of a single model is required to compile historical OAS retrospectively. This is a preferred way of completing the study to relying on numbers reported in the past. As experience shows, no firm freezes its models for years; each update causes jumps in values (or OAS). The following exhibit (Figure 1) is a single-model retrospective view going back to the times of the Russian crisis of '98. We employed the same prepay model and the Hull-White interest rate model operated with a time-dependent volatility function calibrated each day to the ATM swaptions.
Figure 1
