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Analysis of the risk to banks during mortgages Public

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The effect of varying interest rates (from the contracted) on yield rates to the bank during mortgages when incorporating the risk to banks of refinance is discussed. Present and current values for each prepayment year of a mortgage are calculated. Assuming prepayment year follows a truncated Poisson distribution, resulting distributions of present values, current values and yield rates are displayed by example. How these values affect the technique of immunization is also discussed.

  • This report represents the work of one or more WPI undergraduate students submitted to the faculty as evidence of completion of a degree requirement. WPI routinely publishes these reports on its website without editorial or peer review.
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Identifier
  • 03D133M
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Year
  • 2003
Date created
  • 2003-01-01
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