A stochastic partial differential equation model for the pricing of mortgage-backed securities
We develop a dynamic structural model for the wealth of individual mortgagors in a mortgage pool. We model the process of default and prepayment and, by taking a limit as the pool size goes to infinity, derive a stochastic partial differential equation (SPDE) which can be used to describe the evolut...
Main Authors: | , , |
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Format: | Journal article |
Published: |
Elsevier
2018
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