Valuation of Australian mortgage-backed securities allowing prepayments / by Suzanne E. Barrett.

Barrett, Suzanne E. (1995). Valuation of Australian mortgage-backed securities allowing prepayments / by Suzanne E. Barrett. Master's Thesis, Dept. of Commerce, University of Queensland.

       
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Author Barrett, Suzanne E.
Thesis Title Valuation of Australian mortgage-backed securities allowing prepayments / by Suzanne E. Barrett.
School, Centre or Institute Dept. of Commerce
Institution University of Queensland
Publication date 1995
Thesis type Master's Thesis
Total pages 132
Language eng
Subjects 14 Economics
15 Commerce, Management, Tourism and Services
Formatted abstract In this thesis, Australian mortgage-backed securities which allow prepayments are analysed and valued under three different prepayment scenarios. A valuation model is developed and operationalised. An arbitrage-free term structure of interest rate model is utilised as the underlying model. This thesis operationalises and expands on Jamshidian's (1991) and Sherris' (1994) term structure model. Interest rate paths are simulated from the term structure model and are used to value FANMAC 21A under three different prepayment scenarios. The first scenario applies option pricing theory to value the prepayment option and the security. The second incorporates historical prepayment behaviour and finally, the last scenario uses cash flows based on a static prepayment assumption. The model's option values and MBS values are then compared to industry prices. The study values FANMAC Premier Trust 21Afor the period from January 1992 to December 1993. The model's output does not provide a good fit to industry quoted prices, which is largely due• to the unstable industry prices over the period of analysis. This is the first study known to the author which operationalises the underlying term structure model and applies it to value Australian mortgage-backed securities.

 
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