Patent attributes
A method for modeling a current expected prepayment spread for a mortgage-backed security (MBS) as a function of a current refinance activity is disclosed. According to various embodiments, the method comprises the steps of computing a historical MBS prepayment spread value and determining a historical refinance activity value for each of a plurality of historical time value. The historical MBS prepayment spread value and the corresponding historical refinance activity value define a data pair. The method further comprises the step of processing the data pairs corresponding to the plurality of historical time values to determine terms of a multiple-term mathematical formula that is used to calculate the current expected prepayment spread, wherein the terms of the formula include as a variable the current refinance activity.
