Mortgages and Markov Chains: A Simplified Evaluation Model

Paul Zipkin
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Paul Zipkin: Graduate School of Business, Columbia University, New York, New York 10027

Management Science, 1993, vol. 39, issue 6, 683-691

Abstract: This paper has two purposes. The first is purely expository: to introduce stochastic interest-rate models and security-evaluation methods in a simple mathematical setting. Specifically, we assume the uncertainties in the model are represented by a discrete-time, finite-state Markov chain. Second, using this framework, we present a relatively simple model for the evaluation of mortgage-backed securities.

Keywords: finance; stochastic models (search for similar items in EconPapers)
Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:39:y:1993:i:6:p:683-691

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