Modelling mortgage bonds

The purpose of this white-paper is to give an introduction to how FinE models prepayment behaviour.

The paper is organized as follows. It starts off with a short survey of the Danish Mortgage Credit System.

Next we look at the factors that influence a prepayment of a mortgage loan and the market data available to the investor is shortly being categorized.

The rest of the paper formulates the FinE Prepayment Model, this section also includes the estimation results and the derived threshold functions.

The paper closes off with some remarks on how FinE handles the so-called Par-Rule in the pricing procedure.

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