Model Introduction

• Interest Rate Model
  The interest rate paths are simulated by a Libor Market Model (LMM) calibrated daily to SOFR swap curve and swaption market data. On top of that, the mortgage rate paths are projected by a mortgage rate model.
• Prepayment Model
  The prepayment speeds are projected by a suite of prepayment models including turnover, cashout, refinance and delinquency transition models, which are estimated based on the Fannie Mae loan level data.