Hello everyone!
I have derivatives pricing experience and beginning my new position in a company involved in Mortgage-backed securities pricing.
My question is: what is the best, modern and adviceable pricing technique (model) to price Mbs?
Now I have an opinion (is it correct?) :
There are three main methods to price MBS: econometric, option-based, intensity-based for prepayment.
I think that econometric methods are old with its regression based methods of 1980-s that brings OAS, it doesn't use the difference between P and Q measures.
Option-based approach uses optimal decision principles for pricing which does not exist in reality. And intensity based approach for prepayment modeling is modern, using full power of modern stochastic financial mathematics and does not introduce OAS. So, the last method, developed last years, is more favorable.
Am I right?