CMO Valuation

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CMO Valuation

Postby shankster78 » Tue Jul 29, 2008 1:22 pm

Hi All,
I've been asked to value a CMO by this company as part of their interview process which i need to value using Monte Carlo simulation. Here are the terms of it:
Mortgage Term : 360 months
Monthly Payment: $2000 (P + I)
Mortgage holder can prepay a portion of the principal at any time
Initial Monthly interest rate= 0.075/12.
They have also given me the model to implement the process , consisting of stochastic interest rates and a stochastic prepayment model based on the interest rates. I'm getting a value of $243,146 when i value it. I was just wondering to know if it's something that seems approximately what it should be. Your 2 cents will be appreciated.
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Joined: Tue Jun 24, 2008 7:44 pm

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