RT Journal Article
SR Electronic
T1 Interest Rate Model Selection
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 74
OP 86
DO 10.3905/jpm.2004.319932
VO 30
IS 2
A1 Alexander. Levin
YR 2004
UL https://pm-research.com/content/30/2/74.abstract
AB Analysis of the most popular single-factor mortgage valuation models unambiguously rejects the lognormality of interest rates. Recent trends in the swaption market indicate normalization, supporting use of the Hull-White model, which can be quickly and accurately calibrated to at-the-money swaptions. Durations for TBA instruments come up shorter by the Hull-White model and are generally more in line with the empirical measures. The issue of negative rates is not found to be detrimental to the standard OAS pricing practice.