In this release of SPV six prepayment models are analysed. The three standard
models are supplemented with the following models:
- Two models take the delivery option into account via an upper and
lower boundary on the market price. One model is based on the government
curve while the latter model is based on the swap curve.
- A model using the first year saving as an additional explanatory variable
is analysed.
We find that the inclusion of the first year saving is no significant
improvement to the general fit, mainly caused by the fact that the ordinary
prepayment gains and the first year savings are highly correlated. Finally we
find that the inclusion of the new way of handling the delivery option improves
on the estimation results.
Furthermore we have elaborated on the use of data on preliminary redemption. This time the prepayment dictated by the prepayment model is used directly in the forecast of the actual prepayment together with the preliminary redeemed amount.