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

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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. © 2006 Elsevier Ltd. All rights reserved.

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Goncharov, Y., Ökten, G., & Shah, M. (2007). Computation of the endogenous mortgage rates with randomized quasi-Monte Carlo simulations. Mathematical and Computer Modelling, 46(3–4), 459–481. https://doi.org/10.1016/j.mcm.2006.11.016

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