Computation of the endogenous mortgage rates with randomized quasi-Monte Carlo simulations

Authors:
Yevgeny Goncharov;Giray ÖKten;Manan Shah
Affiliations:
Department of Mathematics, Florida State University, Tallahassee, FL 32306, United States;Department of Mathematics, Florida State University, Tallahassee, FL 32306, United States;Department of Mathematics, Florida State University, Tallahassee, FL 32306, United States
Venue:
Mathematical and Computer Modelling: An International Journal
Year:
2007

Citing 3
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Abstract

The problem of computing the mortgage rate implied by a prepayment and interest rate model is considered. A Monte Carlo algorithm that uses a correlated sampling approach is introduced to simulate the model. Numerical results are used to compare Monte Carlo and randomized quasi-Monte Carlo methods with a numerical PDE solution. A particular randomized quasi-Monte Carlo method, random-start scrambled Halton sequence, gives superior performance, especially in high dimensions.