In this release we have included the M0 model. This model uses a simplified version of the prepayment function which does not incorporate the delivery option or any burnout measure. The model is estimated based on a sample consisting of bonds with semi-annual payments, and the model should only be used for such bonds. The model was first introduced in the theme of SPV 08Q1, but it has not been included as one of the standard models until now.
In the theme of this release we introduce three modifications to the DMBS model set-up. Our main conclusion is that the current specification is quite robust since none of the modifications result in significant differences in the estimated prepayment rates or key figures. However, we do find that assigning equal weight to each observations instead of weighting by nominal outstanding improves the results for burned-out bonds without compromising the results for the remaining bonds. Moreover, we conclude that estimating both the mean and standard deviation of the logit delivery function leads to reasonable results.