<t>Try playing around with your parameters (increase volatility and mean reversion speed) and see how sensitive your simulation is. In general, it is not uncommon to observe a slow convergence speed, in particular when your delta time is 30 days (1 month). I found that reducing delta time (to weekly...

<t>Thank you Aaron! This is exactly how I am doing it right now - assuming balloon at reset. The reason why I need to do this is that I am up against a system limitation. It was designed to handle fixed rate loans and can only take one discount rate. I was thinking that by using sort of a "blended r...

Can anyone suggest literature on pricing CRE Mezzanine loans? I was able to find some research on CDO pricing, but nothing that refers to mez pieces in particular. Any help will be appreciated!Thanks!

As fo question number 2, there are some fixed rate loans as well.

<t>I do have the monthly tenor forward curve and I know I could discount the cashflows along the curve, but I have some system limitations and can only use 1 discount rate for all the payments. I am looking for a way to express the monthly tenor forward curve rates through one "average" rate. Is the...

<t>In case you are trying to forecast the term structure of interest rates, CIR offers a closed end (formula) solution to estimate the term structure. You do not necessarily need to simulate the interest rate paths to estimate the term structure. In case you are trying to forecast the short term rat...

<t>I am working on a cash flow model for mortgage pricing and have a question on hybrid mortgages (the coupon is fixed for an initial period of time and than resets to a floating coupon). I do not have a background in mathematics, so those of you who do, please help!It is my understanding that the w...

<t>I am working on a cash flow model for mortgage pricing and have a question on hybrid mortgages (the coupon is fixed for an initial period of time and than resets to a floating coupon). I do not have a background in mathematics, so those of you who do, please help!It is my understanding that the w...

What method did you use to estimate your parameters? What set of data did you use? Your parameters are driven by the data you chose to callibrate your model.

<t>I am working on a cash flow model for mortgage pricing and have a question on hybrid mortgages (the coupon is fixed for an initial period of time and than resets to a floating coupon). I do not have a background in mathematics, so those of you who do, please help!It is my understanding that the w...

I am not sure if you still need this but here is a paper you were looking for

Do you need FICO to determine the spread and the idea is to plug in SATO instead?Also, do you mind sharing the source for your MBS data?

<t>Aaron,It is probably more practical for me to estimate the parameters using historical data. Our model is estimating CRE backed loan prices. Since the market of those products is not so liquid the whole model is going to have larger deviations.The question I have is how to estimate mean reversion...

Thank you DavidJN for your help! Are you familiar with Bloomberg's VCUB function? They have USD swaptions volatility tables which are based on 3-month LIBOR, but they calculate volatilities for all the terms 1-month through 7-years. Are these sufficient for the calibration?

DavidJN,Thanks for your input. Sorry for a stupid question as I am new to this, what option should I use to calibrate 1 Mo USD LIBOR Rates?