Transactions of the Japan Society for Industrial and Applied Mathematics
Online ISSN : 2424-0982
ISSN-L : 0917-2246
Pricing Models of Sequential-pay CMO with Deterministic Repayment Period Tranches(Application)
Tsutomu Tamura
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2008 Volume 18 Issue 2 Pages 217-241

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Abstract
This paper presents a study on pricing models for CMOs (Collateralized Mortgage Obligations), agreeable to conditions that every tranche's price is represented by a closed-form formula. We redesign seqiiential-pay CMOs so that every tranche's repayment period can be deterministic by controlling initial balance and periodical repayment amount, and adopt two types of pricing model. As an end result, actual instances are mentioned which show that our models provide a closed-form solution for every tranche's price.
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© 2008 The Japan Society for Industrial and Applied Mathematics
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