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Lecture 18 - Modeling Mortgage Prepayments and Valuing Mortgages

Lecture 18 - Modeling Mortgage Prepayments and Valuing Mortgages

This video was recorded at YALE - ECON 251 - Financial Theory. A mortgage involves making a promise, backing it with collateral, and defining a way to dissolve the promise at prearranged terms in case you want to end it by prepaying. The option to prepay, the refinancing option, makes the mortgage much more complicated than a coupon bond, and therefore something that a hedge fund could make money trading. In this lecture we discuss how to build...

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