Mortgages and Markov Chains: A Simplified Evaluation Model

This paper has two purposes. The first is purely expository: to introduce stochastic interest-rate models and security-evaluation methods in a simple mathematical setting. Specifically, we assume the uncertainties in the model are represented by a discrete-time, finite-state Markov chain. Second, using this framework, we present a relatively simple model for the evaluation of mortgage-backed securities.

• 저널Management Science · 39(6) · 683–691
• 토픽Stochastic processes and financial applications · Finance
• DOI10.1287/mnsc.39.6.683
• 저자Paul Zipkin