Overview
- Contains all the necessary steps on how to build a callable mortgage bond pricing framework
- Presents step-by-step derivations of used formulas
- Includes algorithms enabling own implementation for professionals
Part of the book series: Finance for Professionals (FP)
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About this book
Callable mortgage bonds are utilized by individuals and companies to finance the purchase of real estate, and this asset class therefore plays a crucial role in modern society. Callable mortgage bonds constitute an enormous asset class and often offer long-term stable investments that are very attractive for pension funds.
This book focuses on the pricing and calculation of risk numbers of callable fixed-rate mortgage bonds. Owing to the, from a financial perspective, irrational behaviour of borrowers, the pricing of these instruments usually requires the use of numerical solutions. Traditionally, it has been either a Monte Carlo simulation or a Finite Difference method. This book covers both methods and, in addition, the relatively new Fourier technique. This latter technique also creates a link between the interest rate derivatives market and the market for callable mortgage bonds. Finally, a chapter presenting a model for the valuation of a mortgage credit institute’s loan book is included.
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Table of contents (11 chapters)
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Front Matter
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Back Matter
Authors and Affiliations
About the author
Niels Rom is Head of Risk and Pricing Model Validation at Nordea Bank in Copenhagen (Denmark). His work includes pricing models, including xVA, market risk models, counterparty credit risk models and AI models. He leads a team consisting of validation specialists with backgrounds in Astrophysics, Mathematics, Mathematical Finance, Physics and Statistics.
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Bibliographic Information
Book Title: Callable Mortgage Bonds
Book Subtitle: Numerical Methods and Valuation Models for Pricing and Risk Analysis
Authors: Niels Rom
Series Title: Finance for Professionals
DOI: https://doi.org/10.1007/978-3-031-87889-3
Publisher: Springer Cham
eBook Packages: Economics and Finance, Economics and Finance (R0)
Copyright Information: The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2025
Hardcover ISBN: 978-3-031-87888-6Published: 10 May 2025
Softcover ISBN: 978-3-031-87891-6Due: 24 May 2026
eBook ISBN: 978-3-031-87889-3Published: 09 May 2025
Series ISSN: 3059-3654
Series E-ISSN: 3059-3530
Edition Number: 1
Number of Pages: XX, 206
Number of Illustrations: 43 b/w illustrations
Topics: Capital Markets, Risk Management, Applications of Mathematics, Statistics for Business, Management, Economics, Finance, Insurance, Financial Engineering