Essay
When pricing through Monte Carlo simulations on trees we are implic- itly using risk neutral probabilities, this is also so when computing the spot rate duration. Is this correct? Shouldn't measures of sensitivity be computed with risk natural probabilities?
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No, when we review the spot rate duratio...View Answer
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Q1: Why is it useful to price Mortgage
Q2: What additional factors may affect the prepayment
Q3: What is a Monte Carlo Simulation?
Q5: How is spot rate duration defined in
Q6: What is a standard error?
Q7: Is the traditional tree methodology well-suited to
Q8: Given that simulations do not offer a
Q9: Is the traditional tree methodology well-suited to
Q10: What is a prepayment model?
Q11: How effective is pricing of Collateralized Mortgage