rule of thumb - CMOs with jumps (sticky or not) may require more paths than pass-throughs. For pass-throughs, the accuracy is shown in Figure 1, compiled when FNCL 6.5 was the current-coupon MBS.

Figure 1

This chart illustrates that the Quasi-Monte-Carlo is about twice as accurate as the regular one for the same number of paths. It also shows that the pricing error grows with the option cost. The reader may decide what to do with a particular portfolio in hand, targeting a desired level of OAS accuracy.

The new generation of our OAS models will report pricing accuracy automatically - along with the obtained value or OAS. It will serve as a convenient tool to facilitate the use of our OAS system. >>>